Can COVID-19 outbreak accelerate India's movement toward processed meat?

A live poultry market puts pressure on producers as fresh meat prices are impacted by supply-demand economics and market shocks. The continuous rearing process and natural gestation period make it difficult to vary supply with demand. Another complexity in India is that the meat consumption cycle is not constant as in other countries. Producers often bear reduced margins or even losses to sustain the farming volumes. To give a perspective, the loss suffered by the poultry industry on account of the current price crash is estimated at around Rs 22,500 crore.

A well-developed processed meat market will benefit both producers and consumers. Processing will increase the shelf life of meat products and will enable producers to absorb demand shocks through improved inventory control. Also the ability to store the product will shield the producers from price crashes.

With social distancing becoming a norm, the need for hygienically packed meat untouched by hand will increase. Indian customers will start asking for traceability, no antibiotics/chemicals, fresh-but-hygienic meat. Processed meat is a logical answer as producers will be able to confirm adherence to these quality requirements. Existing players who can forward-integrate into a processed brand-led play could gain from this consumer trend.

The first challenge in the Indian context is the preference to buy fresh food. Indians are for long used to buying fresh fruits, vegetables and poultry. Changing this buying behaviour will need sustained investment in customer education. The biggest challenge will be to convince that the taste of the meat and its nutrient value is largely undisturbed during processing.

The second challenge is the feared loss of employment among a section of wholesale traders and butchers, who could become redundant if the processed segment grows. As the processed meat industry gains share, such intermediaries often find different roles in the new supply chain network. In addition, we could see an increase in employment in processing plants.

The third challenge is upgrading the processing and supply chain infrastructure. Capacity utilisation in India’s processing plants is around 50 percent, and is hence not an issue. However, it is the supply chain infrastructure that needs to be invested in. A robust cold chain from the processing plants to storages and extending to retail refrigeration will be needed. Favourable government policies will also be needed to attract foreign investments in this area.

Growth of processed meat consumption benefits both producers and consumers in the long run. India, just as many other countries, will continue to have both wet and dry markets. The key will be to create consumer awareness and change the perception towards processed meat. There are many factors accelerating this change in the Indian market-changing lifestyles and demographic profiles of families; exposure to international cuisines; growth of modern retail and restaurants.

Once end-consumer acceptance increases, capacities could be created and utilised well. Some of the Indian players could seize this opportunity to forge international tie-ups. Government regulations will continue to play a key role both in attracting investments and in promoting processed meat as safe and hygienic food. To conclude, this transition won’t be an overnight journey — it could take five to ten years for India to have a well-developed processed poultry meat market.