How food processing industry is helping SMBs write their growth story

How food processing industry is helping SMBs write their growth story
The relationship between the food processing industry and SMBs encourages entrepreneurship in rural areas, empowers agriculture stakeholders, and strengthens the agricultural supply chain, Saket Chirania writes…

India is a land of diversity, known for its rich agricultural resources and culinary heritage. However, for a long time, we witnessed a gap between our agricultural production and the processed food industry. This gap presented an opportunity for small and medium businesses (SMBs) to bridge the divide by entering the food processing industry. By doing so, they not only contribute to the growth of the industry but also create employment opportunities, particularly in rural areas.

Relationship between food processing and SMBs

The food processing industry provides SMBs with a platform to add value to agricultural produce through processing, packaging, and distribution. It enables them to transform raw materials into a range of value-added products, such as snacks, beverages, frozen foods, and spices, catering to diverse consumer preferences. This generates higher revenue along with enhancing the quality and shelf-life of agricultural produce while significantly reducing post-harvest losses.

Moreover, the relationship between the food processing industry and SMBs has a positive effect on rural development. It encourages entrepreneurship, empowers agriculture stakeholders, and strengthens the agricultural supply chain. By establishing processing units in close proximity to agricultural regions, SMBs create opportunities for grain producers and other agricultural product manufacturers to sell their produce at fair prices, minimising the role of intermediaries. This fosters a sustainable relationship, where all involved parties are assured of fairness and transparency, leading to increased income and improved living standards.

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The growth of SMBs in the food processing sector has a cascading effect on employment generation. It provides opportunities for skilled and unskilled workers, creating jobs in processing units, packaging industries, logistics, marketing, and distribution networks. This contributes to the reduction of unemployment rates, especially in rural areas, and enhances the standard of living for many.

Adding value to processes

One of the significant ways in which the food processing industry is boosting SMBs is by creating a market for their products. Small and medium-sized businesses often struggle to find outlets for their processed goods due to limited resources and access to distribution channels. However, established players in the industry often act as intermediaries, providing a platform for SMBs to showcase their products to a wider consumer base. By partnering with these larger businesses, SMBs can reach retail stores, restaurants, and even global markets, expanding their customer base and increasing their revenue.

Furthermore, the food processing industry adds value to raw agricultural products, enabling SMBs to command higher prices for their goods. A simple example is the transformation of fresh fruits into jams or preserves. By processing fruits into value-added products, small businesses can extend their shelf life, increase their marketability, and command a premium price. The implication of adding value benefits businesses and boosts the overall profitability of the agricultural sector.

Optimising resources for growth

In addition to market access and value addition, the food processing industry offers numerous opportunities for innovation and growth for SMBs. As consumers become more health-conscious and demand convenience, processors are constantly developing new products to cater to these needs. This creates a space for small businesses to introduce their unique offerings, catering to niche markets and filling gaps in the industry. Whether it is organic snacks, gluten-free products, or plant-based alternatives, SMBs can capitalise on these trends and carve a niche for themselves in the food processing sector.

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Moreover, the food processing industry also provides SMBs with economies of scale that would be otherwise unattainable. Through collaborations with larger food processing businesses, small businesses can access shared facilities, production equipment, and specialised knowledge. This reduces their capital investment requirements and allows them to process raw produce in larger volumes at a lower cost per unit. By leveraging the resources and expertise of larger players in the food processing industry, SMBs can improve their efficiency, increase their productivity, and compete more effectively in the market.

The food processing industry also promotes sustainability and resource optimisation, benefiting both SMBs and the environment. Processors often prioritise waste reduction and sustainable practices, encouraging small businesses to adopt similar approaches. By transforming food by-products into ingredients or implementing efficient packaging solutions, SMBs can reduce waste, lower costs, and enhance their environmental credentials. Other than improving their bottom line, these practices also resonate with consumers who are increasingly conscious of the ecological impact of their food choices.

The food processing industry serves as a catalyst for the growth and success of small and medium-sized businesses. By providing market access, value addition, innovation opportunities, economies of scale, and sustainability initiatives, collaborations with more prominent players within the industry empower SMBs to thrive in a competitive market. As we recognise the pivotal role played by the food processing industry, it becomes clear that fostering stronger relationships between larger enterprises and SMBs in the industry is not only beneficial to individual businesses but is also essential for the overall development of the global food ecosystem.

(Saket Chirania, Co-Founder of Agrizy. Views expressed in the article are author’s own.)

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About Saket Chirania

Saket Chirania, Co-Founder of Agrizy. He is an accomplished finance professional with a strong track record of driving financial growth and operational excellence across various industries.

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