Food exports into India depend on many variables

Food exporters have a new tool to understand the complex and quickly expanding markets in India. Drs. Ronald Mittelhammer, professor and director of the School of Economic Sciences, and Alok Anand, of the School of Economic Sciences, developed an econometric model that will allow potential exporters to predict demand for categories of food by region and sociodemographic characteristics.

The project was funded by WSU’s IMPACT (International Marketing Program for Agricultural Commodities and Trade) Center. The center provides Washington agricultural exporters with the science and technology they need to be successful in today’s global market by utilizing the expertise of university scientists in research, education and communication to solve marketing problems and transfer technology.

People and food diverse
In India, the total population of the middle class is more than 350 million, which is greater than the entire population of the United States, according to the India Economic Survey. Customs, religion, education and regional differences contribute to the vast diversity found among the people of India. This diversity creates both challenges and opportunities for U.S. firms selling products there.

Prior to this extensive research, there was no comprehensive basis for conducting this kind of analysis in India. The food categories in the analysis included: cereal and cereal substitutes, lentils and lentil products, edible oil, eggs, fish, meat, milk and milk products, vegetables and fruits, beverages and other foods.

Researchers analyzed the demand in these food categories by 14 sociodemographic variables including household size, land, education, caste or social group, religion, region and other key factors, Mittelhammer said.

“Using the model an exporter can, for example, predict which type of consumers in which region of India are most likely to have a higher demand for vegetables and fruits or for cereals and cereal substitutes.”

Fewer stoves, refrigerators
One striking difference researchers noted between U.S. consumers and Indian consumers is the availability of durable goods. In the U.S. almost every household is equipped with a stove and a refrigerator. This is not the case in India.

“In a comprehensive data collection effort in India from 120,000 households, half of the households surveyed didn’t have a stove or refrigerator” Anand said. “These households didn’t own a rice or pressure cooker either. Only one out of 10 households surveyed had the basic durable goods of a refrigerator, stove and some type of cooker.”

Mittelhammer and Anand analyzed the connections between ownership of these basic durable goods and the amount Indian households spent on food.

“The study concluded that ownership of these goods had a profound effect on food choices,” Mittelhammer said. For example, a household that does not own a refrigerator cannot store meat. Meat must be purchased shortly before cooking and eaten shortly thereafter. This has obvious implications for potential exporters of meats and other foods that require refrigeration.

Constraints on variety
The study also concluded that households without a refrigerator, stove and cooker were less likely to change their purchase patterns if the basic goods they tended to purchase went up in price.

“Households without these basic durable goods did not have the same opportunities to change the types of food they purchased compared to households that had refrigerators that would allow them to store a wider array of food products,” Anand said.

The study confirmed that increasing income leads to increased food diversity, which would provide U.S. exporters with an opportunity to supply a broader range of products as income continues to rise in India.

The study examined other sociodemographic indicators that affect food demand. For example, households in one of the castes called the Other Backward Caste or OBC, exhibited less diversity in food consumption compared to households of higher status. This can be due to OBC households generally having less income compared to other social groups as well as a lower level of education.

Religious, regional influences
Households following the Islamic religion (about 12 percent of Indians) consume less diverse food compared to others (mostly Hindu — about 80 percent). These households also have less income on average compared to other groups and generally possess a lower level of education. Households following Christianity (about 2 percent) tend to be wealthier and have a more diverse diet.

Food demand differences also were found by region. Households from the northern region and southern region consume more diverse food due to inherent cultural differences.

Information gleaned from this research can provide U.S. firms with useful insights into the behavior of consumers in India, which will allow U.S. firms to adjust marketing and sales strategies accordingly.
The researchers identified some policy implications from the observed results, Mittelhammer said.

“Since income plays a key role in improving food diversity, effective poverty reduction policies that help households increase income address issues related to dietary diversity as well. In order to address issues caused by poor dietary diversity, governments and other organizations need to adopt multi-faceted sustainable strategies.”