Manufacturers of bakery ingredients such as enzymes, shortenings, and improvers have "to ratchet up levels of innovation" to drive higher margins and unlock opportunities in India's thriving bakery segment, say market analysts.
Frost & Sullivan predicts that the Indian bakery industry is expected to grow by a healthy 8 per cent rate from 2010 onwards.
But the market, devoid of import entry barriers, is tough for local ingredients manufacturers.
"Norms set by the government for products such as bread have increased the bargaining power of end users, reining in revenues in the bakery ingredients market," said Frost & Sullivan analyst B. Maheshwari.
According to the market analysts, although local makers have an advantage in many ingredient markets, the threat from imports 'looms large'.
The Indian market is devoid of entry barriers for imports, with local manufacturers competing against major global players such as Denmark's ingredients giant Danisco and enzyme supplier Novozymes.
Speciality ingredients manufactured abroad are, according to Frost & Sullivan "higher in quality compared with domestic products."
Compounding the situation for local producers are soaring inflation rates in India and rising manufacturing costs that "are eating into profits."
Building a strong health portfolio
"Innovation offers a route to higher margins for ingredient manufacturers," says the analyst.
In pace with the galloping health trend, Frost & Sullivan suggests that "the production of novel, high-quality products offers the edge over competition."
The thriving Indian bakery industry is still in the developing stage, offering huge opportunities for the bakery ingredients market to grow alongside.
In their analysis of ingredients applications for the Indian bakery industry, according to Frost & Sullivan the market will nearly double in seven years from revenues of over $161.4 million (€125m) in 2007 to $278.1 million (€216m) in 2014.