Indian Potato Processing Industry
Indian Potato Processing Industry
Indian Potato Processing Industry
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Abstract: India is the world’s third largest potato-producing nation, although its
potato-processing industry is still in its infancy. Per capita potato processing in
India during 2007–08 was just 365 g (89.69% potato chips, or ‘crisps’, 9.28%
potato powder/flakes and 1.03% French fries), using 1.475 kg potatoes per capita.
This performance compares poorly with that of the leading potato-processing
nations such as the UK, the USA, Canada, France and Germany. However, the
industry is experiencing rapid growth in India, and multinational corporations
(MNCs), such as PepsiCo, McCain and ITC, now have a conspicuous presence.
This paper provides detailed analysis of the consumption patterns of the processed
product in India relative to the world picture. The strengths, weaknesses and
business opportunities of this industry are also discussed.
Rajesh K. Rana is a Senior Scientist at the Central Potato Research Institute, Shimla 171001, HP,
India. E-mail: rkrana@icar.org.in.
The potato is the world’s fourth most important food crop Little Bee Impex and Vimal Oil & Foods Ltd have also
after rice, wheat and maize. India is the third largest entered the arena (Rana and Pandey, 2007). Small and
potato producer (24.61 million tonnes [mt] during the regional players have a very high collective share in
triennium ending in 2006–07)1 after China (71.09 mt) and Indian potato processing. The raw material requirement
Russia (37.55 mt). Domestic potato research and develop- for manufacturing potato products during 2007–08 and
ment have been responsible for higher average potato 2010–11 is estimated at 6.8% and 10.9% respectively of the
productivity in India than in China, Russia or Ukraine national potato production during 2006–07.
(the country with the third largest potato area). India
produced 7.72% of the world’s potatoes from 7.57% of the
total global potato area and with a higher than world Potato utilization patterns
average potato productivity.
Potato processing is a very important component of About 68.5% (16.9 mt) of the potato output, equivalent to
agro-processing in India. Rapid urbanization and 14.9 kg per capita,5 goes to domestic ‘table’ consumption –
improvements in living standards have led to phenomenal that is, largely as the unprocessed vegetable (Rana, 2009).
growth in potato processing in recent years (Chengappa, As the majority of the country’s geographical area lies
2004; Rana et al, 2004; Pandey and Sarkar, 2005; Pandey et under the tropics and sub-tropics, the post-harvest losses
al, 2006; Rana et al, 2008, 2009a and 2009b). Easy availabil- due to high temperatures are quite large, at 12.5%. More
ity and convenient packaging are among the other reasons than one-eighth of potato production is retained as seed
for the popularity of processed potato products, even in for the next year ’s crop. About 7% of the national potato
the far-flung rural areas of India. production was used by the processing industry during
In addition to established potato processors such as 2007–08. Out of the country’s per capita annual potato
Frito Lay India,2 Haldiram, McCain Foods India,3 Golden production of about 21.5 kg, the consumption of
Fries and Balaji Wafers, new players, including ITC,4 Gee processed quality potatoes was only 1.5 kg. In India
Pee Foods, Merino Industries Ltd, Satnam Agri Industries, potatoes are not generally fed to animals.
Potato processing was highest in the USA (12.64 mt), followed by the
Netherlands (3.12 mt), Germany (3.05 mt), Canada (2.75
The potato-processing industry in India can be split into
mt) and Belgium (2.18 mt), against India’s 1.68 mt in 2007–
the organized and unorganized sectors. The organized
08. With these amounts, the quantity of potato used for
sector is under the control of the large manufacturers,
processing in the USA was 4.84 mt, followed by the
operating to corporate standards and enjoying a wide
Netherlands (1.66 mt), Canada (1.41 mt) and Belgium (1.15
presence, while the unorganized sector comprises small
mt) (Keijbets, 2008; Van Eijck, 2009). In India, the figure
manufacturers with lesser-known or no brand names,
was 0.42 mt during 2007–08 (Rana and Pandey, 2007).
producing for local markets. French fries, Alu Bhujia and
potato flakes/flour are manufactured in the organized
Potato chips
sector, while potato chips are made by both categories of
manufacturers. Dehydrated potato products such as Over the last two decades, potato chip manufacturing
potato chips, potato shreds and other products using companies such as Frito Lay India have put considerable
potatoes as full or partial content are generally manufac- effort into the popularization of this product in India. This
tured as a cottage industry or on a home scale within the has led to fast incremental growth in potato chip manu-
unorganized sector. Alu Bhujia is a fine, fried, salty, crispy facturing capacities. The production of potato chips in
and short noodle-shaped snack, with only 35% of the India was estimated to be 0.38 mt in 2006–07 and was
product in the form of potato flakes/powder. expected to increase to 0.59 mt in 2010–11 (Rana and
About 60% of potato processing in India takes place in Pandey, 2007). Indian figures for 2006 compare well with
the unorganized sector (Rana and Pandey, 2007), which is production levels of leading countries like the USA (0.76
growing at the same rate as the organized sector. Surveys mt) and the UK (0.18 mt) (Table 2). The requirement for
have been carried out to assess the market share and processing quality potatoes for potato chips in the USA
consumption pattern of different processed potato prod- during 2006 was 3.04 mt, compared with an Indian
ucts manufactured by the unorganized sector (Jame et al, requirement of 1.51 mt during 2007–08. However, the per
2001; Rani and Ezekiel, 2001; Das and Ezekiel, 2001; Verma capita annual consumption of potato chips in India (0.33
et al, 2001; Kumar et al, 2002), and have shown that potato kg in 2007–08) is much lower than in the USA (7.30 kg in
chips were the most common product manufactured. 2006). In the UK the annual potato chip consumption per
Although some quality and packaging concerns were capita stood at 12.3 kg, in Canada at 11.2 kg, in France at
found, the products were affordable by, and available to 5.2 kg and in Germany at 4.6 kg, all of which are very
the economically weaker sections of society. much higher than in India (Keijbets, 2008).
The per capita consumption of potato products in India MNCs are very important players in Indian potato chip
was 365 g in the year 2007–08 and is expected to be 562 g manufacturing. Frito Lay India and ITC retained a 29.98%
in 2010–11 (Rana and Pandey, 2007). This per capita share of the potato chip market during 2005–06. This
annual consumption compares very poorly with the proportion increased to 30.83% in 2007–08 and was further
leading potato-processing nations – the UK (45.6 kg), the expected to reach 31.55% during 2010–11 (Rana and
USA (37.0 kg), Canada (35.8 kg), France (34.2 kg) and Pandey, 2007). Although MNCs have increased their
Germany (30.4 kg) (see Table 1). Current Indian potato production, their market share has been restricted by the
products are potato chips or ‘crisps’ as they are known in increased competition from existing and new domestic
some countries (89.69%), potato powder/flakes (9.28%) players who are showing encouraging growth.
and French fries (1.03%). Worldwide during 2006, pre-fries
had the highest share of the potato product market French fries
(64.68%), followed by potato chips (14.43%), potato French fries are a comparatively new potato product for
powder/flakes (14.19%) and other potato products (6.70%). Indian markets. The Indian subsidiary of the world’s
The quantity of potato tubers used for processing in 2006 largest French fries company, McCain, is doing much to
Table 1. Potato processing details for India compared to other countries (all products).
Notes: NA = not available; aIncludes manually produced potato chips in the unorganized sector; bBased on FAO production data for
2006, except for India – data for 2007–08 (DES, 2009); cAssuming 15% animal feed (Scott et al, 2000), 8% seed (Scott et al, 2000), 14%
processing (Keijbets, 2008), 9% other uses (Scott et al, 2000), and 54% fresh (residual stock) as the world’s potato consumption.
Sources: Keijbets, 2008; Sanchez et al, 2007; Wenxiu et al, 2004; Dongyu et al, 2004; Rana and Pandey, 2007.
Table 2. Potato processing details for India compared to other Table 3. Potato processing details of India compared to other
countries (potato chips). countries (pre-fries).
Country/region Raw material Product Per capita Country/region Raw material Product Per capita
(thousand t) (thousand t) annual (kg) (thousand t) (thousand t) annual (kg)
USA (2006) 3,040 760 7.3 USA (2006) 6,990 3,678 23.9
Canada (2006) NA NA 11.2 Canada (2006) 2,600 1,410 13.0
Germany (2006) 380 95 4.6 Netherlands (2006) 2,461 1,294 16.0
UK (2006) 702 175 12.3 Germany (2006) 865 455 10.5
France (2006) 74 36 5.2 Belgium (2006) 1,668 834 14.4
China (2006–07) 232 58 0.04 UK (2006) 1,105 582 29.1
India (2007–08) a 1,508 377 0.331 France (2006) 792 447 18.0
China (2006–07) 222 113 0.09
Notes: NA = not available; aIncludes manually produced potato India (2007–08) 17.4 7.8 0.007
chips in the unorganized sector, which are not included in the
case of China and other countries. Sources: Keijbets, 2008; Sanchez et al, 2007; Wenxiu et al, 2004;
Sources: Keijbets, 2008; Sanchez et al, 2007; Wenxiu et al, 2004; Dongyu et al, 2004; Rana and Pandey, 2007.
Dongyu et al, 2004; Rana and Pandey, 2007.
popularize the product. McCain India established a frozen for 2010–11 of 21,332 t. Per capita annual consumption of
potato product factory near Mehsana (Gujarat) during French fries in 2006 was 29.1 kg in the UK, followed by
2006 with an annual capacity of 40,000 t. With this devel- 23.9 kg in the USA, 18 kg in France and 16 kg in the
opment, the annual French fries manufacturing capacity Netherlands (Keijbets, 2008), compared with 7 g in India
in India has reached 54,600 t. McCain Foods India, which (Rana and Pandey, 2007).
had an 86.21% share in the frozen potato products market Potato flakes/flour
in India during 2007–08, is expected to have a 94.94%
market share during 2010–11 (Rana and Pandey, 2007). As far as potato flakes/flour are concerned, Potato King
The rapid gain in McCain’s market share is in part a has been the leading player, followed by Merino
reflection of the dismal performance of domestic Industries Ltd. However, Merino Industries Ltd is per-
processors in this field. However, the consumption of forming better with regard to quality and value addition
potatoes for manufacturing this product was near 0.6% of by providing world-class ready-to-use products and
average potato production during the three years ending product mixtures. Satnam Agri is another significant
in 2006–07 (Rana and Pandey, 2007). player in this segment of potato processing. But many
The main reasons for the low utilization by French fries new, smaller players are constantly entering this market
plants are the limited outlets serving the product and its sector. The potato flakes/powder industry in India con-
high price. Utilization of French fries production capacity sumed more than 0.6% of the 24.61 mt (average potato
in India during 2006–07 was just 14.28%. As additional production of the three years ending 2006–07) in 2006–07.
new capacity is not expected to be on stream in the near This figure is expected to be greater than 1% in 2010–11.
future, the capacity utilization during 2010–11 is expected The capacity utilization in this area of potato processing is
to be 39%. The retail prices of French fries in India are expected to increase to nearly 33% during 2010–11 from
quite high. The price of 15–20 individual fries in the usual just 20% in 2007–08, if we assume no new additional
outlets is US$0.63–1.25. Shortage and the high cost of cold capacity. The country had 156,000 t of annual potato
chain storage are the most important determinants of the flakes/powder manufacturing capacity in 2007–08. MNCs
high retail price. do not manufacture potato flakes/powder in India.
The number of MNC quick service restaurants (QSRs) Per capita consumption of this product in the country
serving pre-frozen French fries and other frozen potato in 2007–08 was just 27 g, which is expected to increase to
products in India is increasing rapidly. At present, 43 g during 2010–11. However, in countries like Germany
McDonald’s and Kentucky Fried Chicken have 170 and 70 the annual consumption of dehydrated potato products in
outlets respectively. Some domestic chains of restaurants
also serve French fries. These QSRs are increasing at an
annual compound growth rate (ACGR) of 40%, reflecting
the equally fast growth in the demand for frozen potato Table 4. Potato processing details for India compared with other
products, including French fries. countries (dehydrated products).
The contribution of French fries to world potato
processing in 2006 was 64.68%; however, this share in Country/region Raw material Product Per capita
India was just 1.03%. The USA used 6.99 mt potatoes in (thousand t) (thousand t) annual (kg)
the French fries industry during 2006, followed by Canada USA (2006) 2,480 400 5.4
(2.60 mt), the Netherlands (2.46 mt), Belgium (1.67 mt) Germany (2006) 1,302 210 15.7
and the UK (1.11 mt) (Table 3). In India, this quantity was France (2006) 215 47 6.1
just 0.02 mt during 2007–08. In the USA, French fries China (2006–07) 185 36 0.028
India (2007–08) 156 31 0.027
production in 2006 amounted to 3.68 mt, followed by
Canada (1.41 mt) and the Netherlands (1.29 mt). In India, Sources: Keijbets, 2008; Sanchez et al, 2007; Wenxiu et al, 2004;
the quantity was 7,795 t during 2007–08, with a forecast Dongyu et al, 2004; Rana and Pandey, 2007.
irrigated farms was below 5%, against 40% on the under short day conditions during mid-October and mid-
furrow-irrigated ones. Drip irrigation led to 1–2% more March. Crop duration under these conditions is less than
dry matter, better distribution of dry matter, less greening 110 days: hence the requirement for producing French
of tubers and remarkable improvement in the appearance fries greater than five inches in length is constrained.
of potato tubers, with the result that the production on
drip-irrigated farms yielded a 25% higher price in the
market. 2009 was a severe late blight year, and the
Business opportunities
overall gross returns per unit area on drip-irrigated farms
was nearly 100% higher than on the furrow-irrigated Domestic demand
farms. The annual compound growth rates of demand for potato
chips, Alu Bhujia and French fries in India were estimated
Cheap labour to be of the order of 30%, 50% and 30% respectively (Rana
Farm labour is very cheap in India. In 2009 a Gujarat et al, 2009b). The target of growing just 10 kg per capita of
female labourer was paid slightly less than one US dollar potatoes per year for processing – that is, 2.5 kg per capita
a day for potato cultivation operations, while her male of potato products – creates a growth opportunity of
counterpart received a maximum of US$1.5 a day. Even in 578%. The current annual consumption of potato tubers
states such as Punjab, where farm labour is costliest, a for processing in the country is 1.475 kg per capita – that
woman labourer earned daily wages of around US$1.5 is, 365 g of product per capita.
and a man US$2.1 a day for potato cultivation activities.
Cheap labour offers an excellent opportunity to produce Idle potato-processing plants
cheaper potatoes in the country. Encouraged by the high business potential, many entre-
preneurs have entered the potato-processing business.
Favourable location for exports However, due to their lack of experience in the field, a
India is a suitable location for exporting processed potato poor understanding of business dynamics and a loss of
products like French fries and potato flakes to the Middle focus on the business, many state-of-the-art potato
East, Mauritius, the Maldives, Sri Lanka, Malaysia, processing facilities in India are lying idle. This situation
Singapore, etc (Khurana and Rana, 2004). is much more common in relation to French fries and
potato flakes/powder manufacturing. Taking into consid-
eration that developed nations are gradually reducing
Weaknesses potato farming, it is very likely that in the future proc-
essed potato products will be sourced from developing
Traditional food habits nations. Plants are lying idle just because of a shortage of
A very large proportion of the population in India still demand and they could provide lucrative business
thinks that processed food is unhealthy and a source of opportunities via take-over or contract manufacturing
ailments. However, with the increasing number of under buy-back arrangements. MNCs have successfully
working women, higher disposable income and a Western taken over7 potato-processing businesses in the past.
influence on young Indians, the number of potato product
eaters is increasing very rapidly. Demand of non-resident Indians
Millions of Indians now reside in various countries
High transportation cost worldwide but retain a strong desire for traditional Indian
The cost of land transportation of goods in India is high. snacks. Currently, Haldiram Foods is unable to meet the
Currently, Indian railways have a very low priority for export demand for Alu Bhujia for non-resident Indians.
potato transportation. However, substantial planned PepsiCo developed Kurkure, a new product with a typical
expenditure on dedicated rail freight corridors and Indian taste: it is now a great success and has been
express highways across the country is likely to bring a launched worldwide. There are countless other possibili-
permanent solution to this problem. ties in this area of business.
to provide integrated solutions for whole farm needs and DES (2009), Potato Area, Production and Productivity Statistics,
problems, and this area would seem to have great 2007–08, Directorate of Economics and Statistics, Ministry of
business potential. Agriculture, Government of India, New Delhi.
Dongyu, Q., Kaiyun, X., Liping, J., Chunsong, B., and Shaoguang,
D. (2004), ‘Development of potato industry and technology
Acknowledgments needs in China’, in Proceedings: 5th World Potato Congress, China,
pp 87–89.
Some of the contents of this paper were poster-presented Ezekiel, R., and Shekhawat, G. S. (2002), ‘Potato processing in
at the 15th Triennial Symposium of the International developing countries with special reference to India’, in
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P., eds, POTATO: Global Research and Development, Vol 2, Indian
and ISTRC in Lima, Peru, on 2–6 November 2009. Nothing Potato Association, Shimla, pp 1010–1020.
from the paper was published in proceedings or in any Ezekiel, R., Singh, B., and Pandey, S. K. (2007), ‘Alu Vidhayan
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1
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2
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3
McCain, another world leader in frozen potato products in Khurana, S. M. P., and Rana, R. K. (2004), ‘Need for initiatives’,
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4
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5
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6
Kufri Jyoti, K. Lauvkar and K. Chadramukhi were the Indian Rana, Rajesh K. (2009), ‘Crucial position of Punjab in Indian
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7
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