Industry Profile

Profile of the Association

Bread industry in India

Bread

Bread is a hygienically manufactured and packed snack food product available at comparatively cheap prices. Major consumers of bread are people from the lower middle class and economically weaker segments consuming more than 90 per cent of the bread industry's total production. Bread is low margin-high volume based processed food and bread making is a labor intensive process.

Bread is the cheapest and basic instant food available for consumption. Though bread is not a staple food in the country, its consumption has increased over the years. In India it is still a secondary staple food when compared to chapatti, puri or rice. Bread is generally a highly perishable item, which has a shelf life of maximum of 72 hrs in a tropical country like India. The government has made it mandatory to stamp the date and time of manufacture and the date and time of expiry on the packet. Therefore, once the bread is baked and packed, any baker will make it a point that it reaches the market at the earliest.

Per capita consumption

The per capita consumption of bread in India is only around 1.5 kg to 1.75 kg in various zones.

The consumption pattern in four zones is

Northern States: 27%
Southern States: 32%
Western States: 23%
Eastern States: 18 %

Size of the Indian bread Industry

Bread industry is 4.00 million tones industry growing at the rate of 6 percent and is expected to grow at the same rate in the medium term. However the organized sector is growing at the rate of 8 percent. In 2006-07, the total production of the organised sector has been estimated at 18lakh tonnes.

The bread industry, consist of organised and unorganised sectors, contributing around 45 per cent and 55 per cent of the total bread production respectively. The organised sector consists of around 1800 small scale bread manufactures around the country, besides 25 medium scale manufacturers and 2 large scale industries which were permitted to continue on the basis of their installed capacity in 1976 when the Government of India reserved bread industry for the small sector

The unorganised sector of bread units/neighbourhood bakeries etc. consist of an estimated 75,000 bread bakers mostly located in residential areas of cities and towns. 35 percent of the total production comes from the small scale sector with about 1500-1800 units in operation. As bread industry is a low margin business, cost control is crucial in sustaining profitability in the long run.

Major Brands

The two major players i.e. BIL & MFIL are having a market share of 10-12 percent and 7-8 percent respectively. Apart from these two, there are few large regional players such as Spencers in South India, Vibbs in Maharashtra, Kitty and Bonn in Punjab, 365days in Delhi NCR, Haryana, etc and Harvest Gold and Perfect in Delhi & NCR

Marketing: The marketing system in the bread industry is based on a strong retail-wholesale distribution network and being a highly price sensitive low margin food product with very short shelf life (about four days on an average) and resultant return of more than 10 per cent of dispatches, the industry is witnessing a very competitive environment with the result that inter alia the consumer's choice and preferences plays an important role in the sales pattern of different brands of bread in the market.

Handling/ Logistics

Logistics plays a key role in the bread industry, as the proper logistic support enables the producer to transport his products in the market at the right time. A producer has to see that all the packs are stacked in solid containers - steel or plastic crates - in order to avoid compression of bread (reduction of volume) during transportation. In case of bulk transport, producers can make use of trucks and tempos, and in case of smaller deliveries to the retail shops, the producer can use smaller tempos and bicycles. A producer also has to make sure that all vehicles are thermal proof, so that the bread is maintained at a lower temperature. All the products should be transported preferably in the night in order to avoid the heat and humidity and also the traffic delays.

Even after the product reaches the retail outlets, the producer has to educate the retailer to keep the bread away from direct sunlight. On keeping it in direct contact with the bright sunlight, bread starts sweating which may result in fungus formation, reduction in weight due to loss of moisture, change in texture of bread, etc.

Global status

Europe dominates the global bakery products market, with an estimated market share of 43.85 per cent in 2007. The world bakery market has become increasingly industrial in recent decades, with developed countries seeing a steady swing away from artisanal bakers and towards more wrapped and speciality bread, which are now an important fixture in modern retail outlets.
In Western Europe and the US, major retail chains in the past have used bakery products as loss leaders to increase the volume of their overall sales. This has prompted manufacturers to adopt price discounting in key baked goods categories such as bread. As a result, profit margins per unit declined. To counter this, manufacturers developed new varieties of value-added products that attracted premium prices for e.g breads enriched with vitamins. Such products were offered in single serve and portable packaging to provide convenience for customers .In North America, demand for bakery products that contain soluble dietary fibre, such as wholegrain bread and oatmeal cookies, increased sales in the sector.
Global figures: The report, which analyses the worldwide markets for bakery products by segment and geographic region, predicts that by 2010 the world bakery products market will be worth about US$407 bn. A compound annual growth rate (CAGR) of 3.93 per cent is projected over the period 2001- - 2010.The Asia-Pacific region is expected to demonstrate the fastest growth, with a CAGR of about 6.93 per cent.
Segments: According to Global Industry Analysts, the bread and rolls segment formed the largest product category in the global bakery products market, with an estimated 48.15 per cent share in 2007.Baked goods such as bread, rolls, pastry and doughnuts have seen a growth of about 3- 4 per cent per year.

Product appearance of bread is seen as significantly influencing impulse purchases.

Spending trends According to the report, over the past five years, customers are spending more on deli and in-store bakery items and less on meat and packaged bakery products.

Company trends The bakery industry has seen marked changes in recent years. Large bakeries have acquired many unproductive bakeries and have heavily invested in automation, cost control and brand development. Productive bakeries have developed niche markets, so exploiting the consolidation of bigger companies. Companies are working hard to satisfy evolving tastes and preferences and there is constant innovation.

4.3 LEGISLATIONS IMPACTING FOOD INDUSTRY
* Prevention of Food Adulteration Rules The Prevention of Food Adulteration Act, 1954 (37 of 1954). The Ministry of Health & Family Welfare, Govt. of India has made recent amendment in the rules vide its Notification no. GSR 491(E) by making printing of detailed information relating to nutritional energy value etc of the food constituents compulsory.

* Standards of Weight and Measures (PC) Rules 1977 Recent amendment has been made in the rules through notification no. GSR 425(E) making the printing of name, address, telephone number e-mails of the manufactures on the packaging material compulsory.

* Packaged Commodities Rules - Standards of W & M Act The Dept of Consumer Affairs (Director of Metrology), Govt. of India, proposed mandatory printing weights at the time of packaging for food products like bread etc.

* The Vegetable Oil Products (Control) Order, 1947.

* The Milk and Milk Products Order, 1992.

* Any other order issued under the Essential Commodities Act, 1955 ( 10 of 1955) relating to food

Integration of various Food Laws

The Food Processing Industry had been experiencing the adverse affect of multiplicity of various Acts/ Rules and Regulations for food standards under the Prevention of Food Adulteration Act, Standards of Weights & Measures Act, Food Products Order, the Meat Products Order, the Bureau of Indian Standards & MMPO, etc. So need was there to converge all the acts. Hence came up the Food Safety and Standards Act, 2006

FOOD SAFETY AND STANDARDS ACT 2006

The food sector in India has been governed by many laws under different ministries. This multiplicity in law in food sector resulted in many problems in the area of food standards maintenance. Need for a single regulatory body and an integrated food law was recognized as a remedy for this multiplicity of laws. The objective of The Food Safety and Standards Bill, introduced in 2005, was to unify the food safety laws in India. Food safety and standards Act 2006 was passed by the parliament on 23rd August 2006

Objective

The main objective of the Act is to consolidate the laws relating to food and to establish the Food Safety and Standards Authority of India for laying down scientific standards for articles of food. The Food Safety and Standards Authority will regulate manufacture, storage, distribution, sale and import, to ensure availability of safe and wholesome food

Highlights of the Act

* Food Safety and Standards Authority (FSSA) to regulate the food sector.
* Food Safety and Standards Authority, aided by several scientific panels and a central advisory committee will lay down standards for food safety.
* These standards will include specifications for ingredients, contaminants, pesticide residue, biological hazards and labels.
* State Commissioners of Food Safety and other local level officials will enforce the law.
* Every entity in the food sector is required to get a licence or a registration under the Act

Food safety and standards authority of India
The Authority consists of a Chairperson and the twenty-two members in which one-third will be women members. Seven members representing ministries:
1. Agriculture,
2. Commerce,
3. Consumer Affairs,
4. Food Processing,
5. Health,
6. Legislative Affairs,
7. Small Scale Industries
* Two representatives from food industry, of which one from small scale industries;
* Two representatives from consumer organizations;
* Three eminent food technologists or scientists;
* Five members representing States and the Union territories (on rotation basis every three years,
* Two persons representing farmers organisations;
* One person representing retailers’ organisation.

Central Advisory committee

The Chief Executive Officer of the food safety standards authority will be Chairperson of the Central Advisory Committee Members. Two members each representing following area
1. Food industry,
2. Agriculture,
3. Consumers,
4. Relevant research bodies and food laboratories,
5. Commissioners of Food Safety,
6. And the Chairperson of the Scientific Committee

The Central Advisory Committee advise the Food Authority on following areas
a. Drawing up of a proposal for the Food Authority's work programme,
b. On the prioritisation of work,
c. Identifying potential risks,
d. Pooling of knowledge
e. Other functions specified by regulations.

Scientific Panel
Following scientific panels established under the Act.
* food additives, flavourings, processing aids and materials in contact with food;
* pesticides and antibiotics residues;
* genetically modified organisms and foods;
* functional foods, nutraceuticals, dietetic products and other similar products;
* biological hazards;
* contaminants in the food chain;
* labelling ; and
* method of sampling and analysis.

Duties and functions of Food Authority.
* Food Authority has to regulate and monitor the manufacture, processing, distribution, sale and import of food so as to ensure safe and wholesome food
* Prepare the standards and guidelines in relation to articles of food
* Set the limits for use of food additives, crop contaminants, pesticide residues, residues of veterinary drugs, heavy metals, processing aids, myco-toxins, antibiotics and pharmacological active substances and irradiation of food.
* The mechanisms and guidelines for accreditation of certification bodies engaged in certification of food safety management system for food businesses. * Set procedure and the enforcement of quality control
* Procedure and guidelines for accreditation of laboratories and notification of the accredited laboratories;
* Prescribe method of sampling, analysis and exchange of information among enforcement authorities
* Conduct survey of enforcement and administration of this Act in the country;
* Prescribe food-labelling standards including claims on health, nutrition, special dietary uses and food category systems for foods.
* Procedure subject to which risk analysis, risk
* Under take Risk assessment, risk communication and risk management.
* Provide scientific advice and technical support to the Central Government and the State Governments in matters of framing the policy and rules in areas of food safety
Following Legislations will be replaced with the new Act on implementation
* The Prevention of Food Adulteration Act, 1954 (37 of 1954).
* The Fruit Products Order, 1955.
* The Meat Food Products Order, 1973.
* The Vegetable Oil Products (Control) Order, 1947.
* The Edible Oils Packaging (Regulation) Order, 1998.
* The Solvent Extracted Oil, De oiled Meal, and Edible Flour (Control) Order, 1967.
* The Milk and Milk Products Order, 1992.
* Any other order issued under the Essential Commodities Act, 1955 ( 10 of 1955)relating to food

4.4 TAXATION ISSUES

Central Excise duty

Excise duty on bread is zero. However, the Revenue Department proposes to levy excise duty on the `dough' used for the manufacture of breads.

VAT on bread is NIL in most of the States.
4.5 QUALITY STANDARDS/CERTIFICATIONS

Quality Standards

The Ministry of Health and Family Welfare and the Ministry of Food Processing Industries have formed different Sectoral Groups in order to facilitate formulation of a proper and efficient Food Safety Programme towards implementation of GMP, GHP and HACCP in the food industry, either under law or voluntary. GMP Good manufacturing practice (GMP) is that part of quality assurance which ensures that products are consistently produced and controlled to the quality standards appropriate to their intended use and as required by the marketing authorization

GMP is aimed primarily at diminishing the risks inherent in any pharmaceutical production, which may broadly be categorized in two groups: cross contamination/mix-ups and false labeling. Above all, manufacturers must not place patients at risk due to inadequate safety, quality or efficacy; for this reason, risk assessment has come to play an important role in WHO quality assurance guidelines.

ISO-9000 The ISO 9000 family of standards represents an international consensus on good management practices with the aim of ensuring that the organization can time and time again deliver the product or services that meet the client’s quality requirements. These good practices have been distilled into a set of standardized requirements for a quality management system, regardless of what the organization does, its size, or whether it is in the private, or public sector. The family of ISO 9000 standards have been developed by ISO and it is made up of four core standards:

ISO 9000:2000 - Fundamentals and Vocabulary
ISO 9001:2000 - Quality Management Systems - Requirements
ISO 9004:2000 - Quality Management Systems - Guidelines for performance improvements
ISO 19011: 2002 - Guidelines for quality and/or environmental management systems auditing

ISO 14000 ISO 14000 is the general term used for ISO 14000 family of standards. ISO 14001:1996 `Environmental Management Systems - Specifications with Guidance for use’ is a standard published by International Organization for Standardization (ISO) and adopted by BIS as IS/ISO 14001:1996. IS/ISO 14001:1996 is the exact replica of ISO 14001:1996. This standard provides for the framework for the Management System for an organization to meet its Environmental obligations reliably and consistently. IS/ISO 14001:1996 is the only certification standard in the IS/ISO 14000 family.
IS/ISO 14001 is a requirements standard. It contains a set of requirements to define the operation of the Environmental Management System. Since the requirements are expressed in a general form, it has the flexibility to be applied to any organization.

ISO has published ISO 14000 family of standards including ISO 14001:1996 standard. The Technical Committee of ISO i.e. ISO/TC 207 Environmental Management Systems is responsible for formulation of these standards. BIS represents India as participating member on this Committee. Experts from India including BIS officers are nominated on this Committee to put forth India’s viewpoints on EMS.

HACCP

Hazard Analysis and Critical Control Point (HACCP) is a process control system designed to identify and prevent microbial and other hazards in food production. It includes steps designed to prevent problems before they occur and to correct deviations as soon as they are detected. Such preventive control system with documentation and verification are widely recognized by scientific authorities and international organizations as the most effective approach available for producing safe food.

HACCP involves a system approach to identification of hazard, assessment of chances of occurrence of hazards during each phase, raw material procurement, manufacturing, distribution, usage of food products, and in defining the measures for hazard control. In doing so, the many drawbacks prevalent in the inspection approach are provided and HACCP overcomes shortcomings of reliance only on microbial testing.

HACCP enables the producers, processors, distributors, exporters, etc, of food products to utilize technical resources efficiently and in a cost effective manner in assuring food safety. Food inspection too would be more systematic and therefore hassle-free. It would no doubt involve deployment of some additional finances initially but this would be more than compensated in the long run through consistently better quality and hence better prices and returns.

HACCP CERTIFICATION

BIS offers two Certification schemes to the food industry.
i) HACCP Stand-alone Certification against IS 15000:1998
ii) HACCP based Quality System Certification provide for two Certification through one audit Certification of Quality System against IS/ISO 9000 and Certification of HACCP against IS 15000:199

4.6 ISSUES AND CONCERNS OF THE INDUSTRY

* The declining trend in growth is now a major concern for the bread industry in India. The annual growth in the bread industry has been 10 per cent during 1980-90. The production declined to 7.25 per cent during 1991-96 and again to 6.5 per cent in 1997-2005. The annual production and consequently sales pattern has been witnessing gradual decline over the two decades.

* Being a perishable product, the bread industry faces numerous challenges. Like lack of a modern well-developed retail network requisite for distribution of a perishable product. It is this factor that gives a distinct advantage to the local units that produce on a small-scale, evidently accounting for a predominant share of the total industry, especially in the rural markets.

* FOOD REGULATORY MEASURES: the bread industry is facing challenges due to stringent food regulatory measures like Mandatory Printing of Manufacturing Date under the PFA Act/along with best before date, Quantitative Ingredient Declaration (QUID) and Nutritional Labeling.

* MAXIMUM PERMISSIBLE ERRORS (TOLERANCE LIMIT) UNDERTHE WEIGHTS & MEASURES (PC RULES: The Department of Consumer Affairs (Directorate of Weights & Measures), proposes to reduce by 50%, the existing Maximum Permissible Error in weight/volume for various Packaged Commodities, including breads and biscuits. This has also pose a problem before the industry as there can be variations due to various factors in the processing, manufacturing, packaging, marketing etc., involving error/loss of weight of bread, as also on account of the inherent features of wheat flour and other inputs, atmospheric/climatic conditions resulting in error in the weight of Bread.

* EXCISE ON DOUGH: The Revenue Department proposes to levy excise duty on the `dough' used for the manufacture of breads.
Although breads, as a finished product, are excise-duty exempt, the Excise Department wants bread manufacturers to cough up excise duty on the `dough' — which is a perishable intermediate product in the bread making process in the country.