Oil & food Journal November 2016

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RETAILN MARKETNIINIIINDN

ANN�OVERVIE

Changing tastes: how Indian tea lost steam in the global market TheN�GreatIiIndianniFinanci CrunchNIDemonetizatio

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RETAIL MARKET IN INDIA - AN OVERVIEW

Indian tea lost steam in the global market 23

Himachal growers celebrate 100 years of growing apples

Short, long, curved, twisted and scrumptious The Indian Pasta Industry 41

Food ministry favours slashing import duty on wheat Bio-diversity conservation laws should not hamper agriculture: P.M Pulses traders appreciated the Subramanian committee’s report

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India's Packaged juice market on its wheel 30

Government to extend export duty benefits to onion India may soon export non- basmati rice to China

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Fruit pulp export to UK, USA and Canada from Dec 2017 Andhra Farmers focusing on good return plantations 77 Green always ensure quality production: Bhavesh

Indian imported food market: Growth, Opportunities & Challenges

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The Great Indian Financial Crunch Demonetization

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EDITOR Manzar Aftab Naqvi CONSULTING EDITOR Basma Hussain GROUP EDITOR Firoz H. Naqvi firoz@advanceinfomedia.com Graphic Designer Naved H. Kazmi naved@advanceinfomedia.com Circulation Seema Hayat Shaikh seema@advanceinfomedia.com Delhi Sayyed Shahnawaz +91-8375034558 Gujarat Brijesh Mathuria +91-9924546999 Genreal Manager Gyanendra Trivedi Marketing & Circulation Office 121,1st floor, Rassaz Multiplex, Station Road, Mira Road (E), Dist. Thane- 401107 Telefax : +91-22-28555069, Tell.: +91-22-28115068 Mob.: +91-9867992299 E-mail: info@agronfoodprocessing.com sub@advanceinfomedia.com Vol 12 Issue 01 November 2016 Annual Subcription Rs.950/By Normal Post Add Rs. 400/-For Courier Charges Add Rs. 50/- For Outstantion Charge Overseas $80 By Air Mail Email:sub@advanveinfomedia.com Single Copy Cost Rs. 100/Printed, Published & Owned By Manzar Aftab Naqvi RNI No. MAHENG /2005/15987 Postal Regd. No. THW /50/2014-2016 WPP License No. MR /TECH /WPP-308/TW /2016 Regd. Office Advance Info Media & Event 103,AmarJyot Apartments, Pooja Nagar, Mira Road (E) Dist Thane-401107(Mumbai) Printed At Rolleract Press Services A-83,Ground Floor, Naraina Industrial Area Phase-1, New Delhi -110028 The views expressed in this issue are those of the contibutors are not necessarilly those of the magzine. though every care has been taken to ensure the accuaracy and authenticty in infomation, "Oil & Food Journal" is however not responsible fordamages caused by ministerpretation of infomation expressed and implied with in the pages of this issue.

All disputes are not to be referred to Mumbai Jurisdiction

EDTIORIAL

early three weeks later, India is still deeply divided over Narendra Modi’s radical move to pull out the Rs500 and Rs1000 notes from circulation. The inconvenience and pain of demonetisation have been evident: People have died in long queues outside banks, the informal economy is at a near standstill, and money is in short supply.

Given that economics is not every politician's cup of tea, what were the experts in this country drinking while rolling out this scheme? Did nobody tell the government that only 53 per cent India has bank accounts? Did nobody tell them that printing Rs 2,000 notes will create more problems because nobody would have smaller notes to break them? Did nobody tell them that at the least they should print notes that could fit in the ATM cassettes, and print smaller notes first?

But the government’s argument has been straightforward: By taking two of India’s biggest currency denominations out of circulation, it hopes to be able to clamp down on black money, thereby curbing corruption, improving tax compliance, and choking terror-funding.

Well all is bad in this utopia, Dairy milk cooperatives across several big states are happy about the demonetisation-led boost to banking. Karnataka Milk federation, which daily procures 70 lakh litres milk from 9 lakh farmers across 14,000 societies will start making the weekly payments via bank accounts, and Hatsun Agro, a leading private dairy player form Chennai which procures 28 lakh litres milk daily and disburses Rs 73 crore every ten days to farmers has been making 99.65 % of it payments through banks accounts for the past one and a half years.

Amul had 18000 societies that were disbursing about Rs 450 crore per week i.e. Rs 2-3 lakh per society in cash to milk producers is facing trouble as the farmers and their representative are not ready to go for digitization, but Amul thinks it will soon settle the issue.

Mother Dairy which currently procures 35 lakh litres milk daily and pays Rs 80-90 crore a week to farmers, also makes direct cash transfers to its five farmer’s procurer company who are facilitating farmers to open accounts.

Now time for some nous, so natural flavours & fragrances (F&F) demand in food is expected to $ 960 million in 2020 from $760 million in 2015, the year in which it accounted for 34 per cent of total F&F demand. Many variables affect the food industry and, in turn, demand for natural flavour blends, essential oils and natural extracts, and natural aroma chemicals. Demographics pertaining to age and ethnicity, as well as health and wellness trends play an important role in shaping food preferences that affect flavour demand.

Consumer preferences have a significant impact on the outlook for this market.

Dairy products represented the largest application for natural food flavors in 2015, supported by consumer preference for natural flavors in ice cream and yogurts, as well as growing popularity of yogurt products among consumers.

Future Consumer, which has 27 private brands in its food and FMCG portfolio, has managed to grow only six of its top brands so far at about 80 per cent. Top-selling staple brands such as Golden Harvest and Tasty Treat were primarily responsible for growing the topline which stood at Rs.564 crore.

Future Consumer recently raised money from PE funds from the World Bank arm of IFC to narrow down its interest cost and reduce its debt levels and has invested in building the Kosh brand of oats and expects it to become the third grain after wheat and rice. It now wants to make oats (Rs.300 crore) as big a category as instant noodles (Rs. 4,000 crore) and take it to the centre of the plate.

Ending my editorial on fun note, Coca-Cola is feeding our selfie addiction with its new “selfie bottle. The bottle’s base is fitted with a camera so that when you tilt it at 70-degrees, it automatically snaps a photo of you taking a swig. More importantly, you can immediately share said photos to Snapchat, Facebook, or Instagram.

Well hopefully I can get hold of this selfie bottle someday, and click pictures with my family, colleagues and friends!!!

Till next time.

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RETAIL MARKET IN INDIA - AN OVERVIEW

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he overall retail market in India is estimated to be ~630 Bn USD in 2015. The organized market is estimated to be 9-10% of the total market i.e. ~ 60 Bn USD. The sector has grown at ~12 % over the last decade and going forward we expect growth to be moderately higher. We expect the retail

market to be 1100-1200 Bn USD by 2020, of which organized retail could be potentially 140-160 Bn USD. The overall growth would be driven by significant demographic shifts: 70% increase in income levels, 100 Mn youth entering the workforce, increasing

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UPWARD TREAND

nuclearization & 35% of Indians living in urban centers.

In the last few years, retail has been one of the top performing sectors globally from a shareholder returns perspective.

However, in India, retail lags other sectors on key metrics of profitability and return on capital. Our analysis of the top 10 companies in key sectors, shows that the average profitability in retail is lower by 300-500 bps and return on capital employed by 500-1000 bps vs other sectors. The same comparison also indicates Indian retailers deliver lower returns when compared with global peers.

The sector performance is shaped by • Value conscious, digitally connected

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UPWARD TREAND fronts simultaneously. It is critical for senior leadership to craft a large scale transformation agenda to stay relevant and win in the market place. Senior leadership effort to drive this large integrated change is imperative. Our research suggests that 2/3rds of such efforts do not meet desired results due to lack of senior leadership commitment.

consumer: who demands lower prices and is getting increasingly digitally influenced.

towns, the relevance of variety would increase, driven by lack of options in organized retail.

• Supply side economics: Lower margins relative to global peers driven by lower salience of organized retail and higher rents.

• Pure-play online players would continue to grow and strengthen their business models and capabilities. Retailers who are able to build strong capabilities in omni-channel would be better poised to win vs pure play in most categories.

• Competitive landscape: Strong value proposition and low cost model of traditional retailers; Emergence of E-commerce as new competition.

• Regulatory barriers: Ability to attract capital, running a cost efficient operation and ease of doing business constrained by regulation, both at the Center and the State level.

The one big trend that would shape the industry is the increasing expectations for retailers to provide a true all-channel experience.

However, the growth for organized retail is not a given. The size and profitability of the opportunity would be driven by both some external uncontrollable factors but also by the actions of the players themselves.

In order to realize its full potential, it is imperative for players to act on multiple

By 2020, we expect • ~650 Mn consumers will be online, of which 350-400 Mn consumers would be "digitally influenced" in retail categories.

• E-commerce market to grow to 4550 Bn USD online. There could be a potential upside with active steering by the supply side.

• The drivers of buying online would not be just price but convenience, availability of a relevant, wider variety. In Tier 2

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A typical transformation journey is examined through three lenses: • Win in the medium term: Identify what the consumer really wants and build the consumer proposition and aligned operating model. This requires a recrafting of the operating model elements, categories, formats and building new revenue streams.

• Fund the journey: Generate cash from core operations to support investments to pursue mid term goals.

• Enabling the transformation: Invest in organization and build new capabilities to improve efficiency, productivity and improve morale.

Winning in the medium term Winning in the medium term entails the following levers: • Sharpen / Reinvent core proposition: Winning retailers identify and sharply target a set of shopping spaces—defined as an intersection of shopping mission and demographic elements (income, age, location). These winners provide

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UPWARD TREAND Enable the transformation To make the transformation a reality, senior leadership needs to build organization capabilities across the following dimensions • Creating talent pools across the organization: At senior level, investing early for cross functional & right experience, enabling middle managers to transition from functional experts to better leaders and right skilling at the entry level

a superior consumer proposition in the prioritized shopping spaces and align their operating model elements to offer a consistent consumer value proposition and experience.

• Win with the omni-channel consumer: Whilst omni-channel is a buzz word today, retailers are not very clear on what to offer (and why ) and its impact on the overall economics.

Retailers need to take a strategic view of the opportunity and be clear on their aspiration: Potential revenue (& profit pools), right to win vs pure plays, brick & click propositions and take a de-averaged view by category. Retailers need to then lay out a clear path on how they would evolve. Finally, retailers would need to build a new set of capabilities through both organic and inorganic routes.

opportunities to balance growth and profitability.

• Margin enhancement through COGS reduction: Given lower profitability and margins compared to global peers, Indian retailers should take a structured playbook approach to COGS reduction using a set of levers that are accretive in short and long term.

• Retail execution excellence: Relentlessly execute against key dimensions: customize merchandize to catchment, efficient supply chain, deliver an instore experience consistent to banner proposition, allocate space effectively and run effective localized campaigns.

These moves create significant cash release for the company to fund its medium term aspirations and strategic bets.

• Customer advocacy: Conventional media is getting less credible as sources of recommendation. Creating strong advocacy by leveraging the right advocates (~2% of the customer groups), focusing on the drivers for advocacy has proven to be far more powerful.

Fund the journey Companies need to examine three levers to fund the journey.

• Pricing and promotion Optimization: It is critical to take a holistic approach that ensures that the overall perception of pricing is in line with the banner proposition, and simultaneously monetize

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• Building the capabilities for 2020s: The winners of the future will require new capabilities—some of which retailers today cannot build easily or organically.

• Adapting smart simplicity principles: Indian retailers would do well to avoid the mistakes that larger retailers in other markets have made as they grew larger.

Increase in size and complexity in the marketplace led to complicated and bloated organizations. There is a need to redesign the organization to be lean, nimble and simple.

A transformation journey is long and a challenging one—it requires a strategic orientation to define the future goal posts, full organizational commitment, and execution resilience. However, results from a successful transformation exercise can change the performance trajectory and hence it is imperative that retailers put in the right effort and resources to reorient themselves to transform.

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COVER STORY

Indian tea lost steam in the global market

Ghufran Naqvi

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British investors switched their interest from India and Sri Lanka to African countries, mainly Kenya, Malawi and Tanzania, in the 1970s.

Although our exports of tea had stabilised at around 200 million kg (mkg) per year, there was a steady upsurge in domestic consumption, which contributed to healthy prices in the auction centres.

In China, there was a phenomenal expansion in the area under tea, especially after the collapse of the USSR and emergence of the CIS countries, which led to an increase in the number of buyers in the world market.

markets for tea is the United States where Americans drink 3.6 billion gallons annually and supermarket sales top $2 billion, according to the tea association of the USA. Black tea is predominantly produced and exported by Kenya and Sri Lanka. Green tea is mainly grown and consumed in China. Although black tea is by far the most produced and exported tea, production and exports of green tea are rapidly increasing.

But in the new millennium, the situation seems to have taken a turn for the worse due to a combination of factors.

World production of tea has gone up by nearly 250 per cent from 1,527 mkg to 5,200 mkg between 1975 and 2015.

Vietnam also brought in a larger area under tea to cash in on the boom.

INDIA’S POSITION ON THE GLOBAL FRONT Tea is among the world's most widely consumed beverages. One of the biggest

Asia-Pacific dominates the global market and accounts for 40% of the total demand in the tea market. The maximum production of tea and the largest areas under tea plantation belong to India and China respectively. Leading tea-

ea has been one of India’s finest agro-assets for a long time and the final quarter of the 20th century turned out to be reasonably prosperous for the tea producers of India.

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13 www.agronfoodprocessing.com producing countries are China, India, Kenya and Srilanka. While production of black tea is growing 3.9% annually, production of green tea is growing 11% annually and herbal tea production is growing more than 15% each year. The trend towards health consciousness, coupled with this increased competitive pressure, will further drive new product development in the next five years, which will in turn drive industry demand.

UPWARD TREAND

The top export markets in volume terms for 2015-16 were Russian Federation (48.23 million kg), Iran (22.13 million kg) and Pakistan (19.37 million kg). In terms of value, the top export markets

36,000 cr turnover by 2017.

According to the Agro & Food Processing Times, the total turnover of the tea industry in India is likely to touch Rs 36,000 crore by 2017 from the current

were Russian Federation (US$ 102.48 million), Iran (US$ 87.39 million) and UK (US$ 62.8 million). All varieties of tea are produced by India. While CTC accounts for around 89 per cent of the production, orthodox/green and instant tea account for the remaining 11 per cent.

level of about Rs 19,500 crore. With nearly six lakhs hectares area under tea cultivation, the domestic tea industry is growing at a compound annual growth rate (CAGR) of about 15 per cent.

The global market is highly concentrated.

However, the presence of large unorganized market in Asia Pacific is expected to impact the profitability of Western producers.

Tea Exports from India declined by 14 million kgs in 2012 mainly due to the higher price levels with teas from other origins looking more attractive pricewise. Import of tea into India in 2012 was only marginally lower than the previous year.

Indian tea exports average 200 million kg with the unit realisation averaging at about `175.30 per kg. India is the world’s second largest producer after China and second largest consumer of tea, accounting for nearly 25-27% of world tea production. India accounts for around 1012% of world tea exports. Further, certain varieties of tea (for example, Darjeeling) are grown only in India and are in great demand across the world. However, India has been losing its share of the global tea exports in the face of the threat coming from countries such as China, Sri Lanka and Kenya.

Tea Statistics in India By building on a proud legacy of enterprise that spanned nearly two and a half centuries, India has acquired an exalted status on the global tea map. The country is the second largest tea producer in the world. Interestingly, India is also the world's largest consumer of black tea with the domestic market consuming 911 million kg of tea during 2013-14. India is ranked fourth in terms of tea exports, which reached 232.92 million kg during 2015-16 and were valued at US$ 686.67 million.

Production of tea reached 1,233.14 million kg in 2015-16. Around 1,008.56 million kg was produced in North India and 224.58 million kg was produced in South India.

India has around 563.98 thousand hectares of area under tea production, as per figures for December 2013. Tea production is led

by Assam (304.40 thousand hectares), West Bengal (140.44 thousand hectares), Tamil Nadu (69.62 thousand hectares) and Kerala (35.01 thousand hectares).

According to estimates, the tea industry is India's second largest employer. It employs over 3.5 million people across some 1,686 estates and 157,504 small holdings; most of them women.

Area under tea cultivation (end-2013) & production in 2013-14 Indian tea industry likely to touch Rs

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“India is world’s largest consumer, second largest producer and fourth largest exporter of tea after China and accounts for nearly 30 per cent of global output and nearly 25 per cent of tea produced worldwide is consumed in India ,” told DS Rawat, Secretary General of ASSOCHAM. “Branded market accounts for nearly 55 per cent of the total market and is growing at about 20 per cent while the unbranded market is growing at 10 per cent annually,” said Mr Rawat.

Nearly 35 lakh workers are employed in over 1,500 tea estates across India and about 65 per cent of these are employed indirectly.

According to an estimate, the tea production during the current year is likely to stay over 950 million kg as against 966.4 million kg in 2010.

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“Awareness about health benefits associated with moderate intake of tea is another significant factor behind this upsurge in its demand as now more and more people are familiar with healing properties of tea,” said Rawat.

Historically regarded as a hot beverage, the penetration of tea in the non-alcoholic cold beverage segment is another driving force for this industry owing to the rising affinity towards ice-tea which currently accounts for over five per cent of entire non-alcoholic beverage market in India.

The Indian tea industry is presently facing tough competition from China, Sri Lanka, United Kingdom, Kenya and Japan.

tea is driven by rising consumer incomes, quality of tea and product diversification with flavoured tea production. The share of CTC tea constitutes 80% of the tea market followed by Orthodox Tea &Darjeeling Tea. Apart from them there are also a variety of flavoured teas such as green tea, earl grey tea, jasmine tea, ginseng oolong, masala chai, green lemon tea, etc.

CTC (cut, twist and curl) tea is the major contributor in the tea market segment but with the increasing consciousness on the health issues, green tea sales are picking up. Specialty tea market in India

Hindustan Unilever is the current market leader in terms of sales value with over 20 per cent market share; while Tata Tea is the leader in terms of sales volume with nearly 20 per cent market share.

Market Segmentation Indian tea market is huge with large number of local and regional players. With the passage of time and due to change in the consumption pattern, there has been diversification and value addition in tea production. In India, tea is consumed in two forms: packaged (branded) or loose. While a major share of the market is of loose tea suppliers, branded tea manufacturers are also fast increasing their market share. The demand for packet

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COVER STORY is growing at the rate of 25% annually.

Price Realisation In India more than 50% sales of tea is routed through auction at various auction centres located in North & South India. Tea generally moves directly from factory either to auction centre for sale or for direct sale to national or international buyers. Auction buying is much more fragmented and there exists a sizable gap between wholesale and retail prices. There is also a clear seasonality in prices of tea within a year. Another of the variable explaining the variance in auction prices is unit export price.

Higher export price raises the bargaining position of sellers at auctions. Export volume also has an influence on the price formation at auctions as higher export reduces domestic availability and hikes up domestic price. Further, lots offered and quantity sold is inversely related with average price realization at auction.

Exports stagnant India has been exporting approximately 200 mkg of the beverage per year for over 50 years and we have not been able to increase the quantity, mainly because of our own domestic demand.

For the period under review, Kenya’s shipments have gone up by leaps and bounds and its exports are currently around 350 mkg per year.

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COVER STORY There has been a steady increase in auction offerings in India, Sri Lanka and Kenya, proving the effectiveness of this system of marketing for a product like tea, which is plucked and processed on a daily basis, and where quality variations are immense.

Nearly 50 per cent of the Indian production is channelled through the auctions. London, which functioned as a terminal auction centre for tea from 1839, closed down in 1998 due to its shift to coffee.

Sri Lanka’s shipments have also gone up from 200 mkg to 280 mkg per year.

China has also registered a healthy growth to 300 mkg, mostly of green tea, catering to a certain extent to the Chinese diaspora.

Indian exports to the USSR, after hitting a peak of 100 mkg per year in the 1980s, have halved in the new millennium to be replaced by Sri Lanka for orthodox, Kenya for CTC and China for green tea and, to a small extent, for orthodox tea.

It is important to note that from 1970 to 1992, 90 per cent of imports of tea into the USSR were from India!

India Growers Seek Subsidies for Orthodox Tea The overseas market for India tea is changing due to demand from the U.S. and Europe for loose-leaf and fine-grade orthodox teas.

These teas bring a higher price, especially when certified organic, biodynamic, and fair trade, but yields are lower and the tea can be more difficult to process. India currently produces 80 million kilos of orthodox tea of which 95% is exported.

The cost of production is 13% higher than the cost of producing cut-tear-curl tea, as per the India Tea Association.

“Orthodox tea is labour-intensive as it involves selective plucking of the leaves.

Labour costs, which comprise 60% of the total costs, have gone up significantly over the past 10 years while the total cost has escalated by 10% per annum,” according to ITA. “Increasing the subsidy would not only help the planters mitigate the rising costs but it will also boost CTC players to switch over to orthodox tea,” ITA’s Chairman Azam Monem said. Five years ago, while the conversion rate accrued by the producers to switch over from CTC production to orthodox production stood at Rs 14–15 a kg, the same rate has gone up between Rs 20 and Rs 30 per kilo.

Monem predicted if the India Tea Board, which operates under the aegis of the Union commerce ministry, increased the subsidy, the annual domestic production of orthodox teas will top 100 million kg, up from the existing 85 million kg.

Monem did not specify how much the standard 30% subsidy should increase; the rate varies by region and tea grown.

In 2015, the Tea Board agreed to increase its subsidy by 25% for orthodox gardens producing organic tea and agreed to pay 50% of the cost of certifying these gardens.

Auction centres

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Losing credibility There has been a rise in preference for Kenyan and Sri Lankan teas over the years. India seems to be losing its credibility as a dependable supplier to the world market, partly because of its burgeoning internal market and partly because of uncertain government policies.

Indian tea is averaging below $2/kg at the auctions, whereas Sri Lanka is well above $2 and Kenya is over $3.

Higher yields Also, to be kept in mind is the fact that African yields are higher, they have a more even distribution of the crop because of the equatorial climate and labour wages are much lower.

What is very disturbing, however, is the disparity in the prices realised for North Indian teas and South Indian teas, which stood at Rs 70.34 and Rs 44.64, respectively, in 2000 and has now widened further to Rs 142.05 and Rs 84.37, due to quality and consumer preferences. The cost of production of tea in India has gone up steadily and substantially and is now approaching Rs 100/kg. South Indian teas are languishing at uneconomic levels.

Apart from the time-tested effects of supply and demand, a few special events of the last 50 years have had an impact on the tea market.

Export of tea has remained flat due to increasing competition India is the fourth largest exporter of tea in the world with major export destinations as Russia, UAE, United Kingdom and

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COVER STORY We were not able to obtain suitable machinery. Now there will be an easing of trade all around the world and we are going to have modern technology,” said Mitra Mobayen, who manages Iran-based Tala Tea Co. Another noteworthy development was the announcement that the Dubai Multi Commodities Centre (DMCC) will launch a premium tea brand called Shay Dubai.

The Global Dubai Tea Forum was hosted by the DMCC’s Tea Centre, a trading arm of the government of the United Arab Emirates (UAE) an alliance of seven sheikdoms with a population of 9.5 million. This was the 6th edition of Talking Tea.

Poland. Though tea production in India has grown over the last 10 years with a CAGR of 3%, the export has remained static due increase in the domestic consumption as well as increasing competition from other tea producing countries. Tea export from India during 2012-13 was estimated at around 216.23 million kgs valued at `4005.93 crore.

Over the year’s tea export has remained flat due to increasing competition from Kenya and Sri Lanka which are able to sell the tea at cheaper price with the same quality level. In India, orthodox tea, CTC tea are main types in which tea is produced, however, green tea is also produced to some extent. India exports CTC grade tea mainly to Egypt, Pakistan and the UK, and the orthodox variety to Iraq, Iran and Russia.

According to records available with the Tea Board, the CIS (Commonwealth of Independent States) countries import the highest quantity of tea from India, while, the exports to the UAE and Pakistan recorded a significant increase in 2013.

India also imports small quantities of tea not only from Kenya and Sri Lanka but also from other countries, mainly for reexport and blending and value addition.

Because rising tea prices and healthy domestic demand, players are expected to focus on the local market. Moreover,

import demand from few countries is anticipated to be subdued. Consequently, India’s tea exports are estimated to decline by 5% to 195 million kg in 2014 on account of muted global prices and weak demand from Egypt and Middle Eastern countries due to political uncertainties.

On the other hand, exports of orthodox tea, consumption of which is insignificant in India, are expected to rise by 5% to 95 million kg primarily on the back of healthy demand from countries including CIS and Turkey. In addition, global orthodox tea prices are estimated to increase by 10% due to flat global production, particularly from Sri Lanka, the largest exporter of orthodox tea.

Global Tea Industry Faces Diverse Challenges Middle Eastern and Asian tea executives were resolute in the face of diverse challenges identified earlier at the biennial Global Dubai Tea Forum.

The group of 390 executives welcomed back into the fold their colleagues from Iran, the world’s fourth largest tea consuming nation per capita and a significant exporter in the years prior to global sanctions imposed by the United Nations. The sanctions were lifted in late 2015.

“What sanctions did to us was to reduce the ease of transfer and increase prices.

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Ahmed Bin Sulayem, executive Chairman of the DMCC, told attendees the brand is not positioned to compete with Lipton: “Shay Dubai is DMCC’s very own signature high-end tea brand.

We’re excited to share a first look at this new product here,” he said.

Flavors include Khaliji Blend, Dubai Spirit, and Arabic Breakfast but were not available for sampling.

The DMCC Tea Centre is now the world’s largest re-exporter of tea, processing 41 million kilos in 2015 (90 million pounds) which is more than triple the 13 million kilos processed in 2013, according to Tea Centre Director Sanjeev Dutta.

Globally demand continues to outpace supply with auction prices at lows last seen in 2008. Civil wars and social unrest continue to weigh heavily on the business of tea. Economic doldrums globally and the depressed Russian and CIS tea markets received a lot of attention.

The market for tea exports is weak, reported Manuja Peiris, Chief Executive of the International Tea Committee. The average price for tea was $2.40 per kilo last year, down from a high of $2.65 in 2012 and slightly below the recent recession-year averages of $2.42 per kilo.

Demand continues to rise and while tea growers produced 5.2 million metric tons in 2015 — domestic consumption in the

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COVER STORY by 4,000 metric tons with Ukraine and Kazakhstan showing the greatest declines in the past year.

Two developments: the re-entry into the export market by Iran, a major producer of tea and tea growth in the United States market were upbeat. The U.S. last year was the only major tea consuming country in the world to report increases in consumption and tea imports. Readyto-drink tea, which holds the largest value share in the U.S. tea market was up 6.1% last year, according to the Beverage Marketing Corp.

producing countries left only 1.75 million metric tons or 34% of the total harvest for export.

The availability for export is down from 2006 when 43% of the annual crop was exported. India alone consumes 911 million kilos annually — 19% of the world’s tea.

“India operates in a cocoon with international tea trends only marginally affecting price behavior,” said Sangeeta Kichlu, President of marketing with Assam Company India, Kolkata.

three-year average price for the tea it exports was $2.67 per kilo, according to ITC which is celebrating its 80th anniversary. Prices are FOB. Middle Eastern imports are way down at 218,470 metric tons compared to 226,930 in 2014. Five years ago Middle Eastern countries imported 250,000 metric tons of tea annually. The Russian Federation imported 3,000 fewer metric tons in 2015 and imports to the CIS countries fell

India is experiencing setbacks due to changing weather patterns that reduce yield at a time when demand is rapidly growing as a result “India is expected to become a net importer of tea.” Leading international packeteers “are eying India for their future growth,” she said.

Kenya in 2015 accounted for 25% of global exports, China’s share of exports rose to 18%, Sri Lanka fell to 17% and India exported 12% of the world’s tea.

Sri Lanka continues to lead the exporting countries with a three-year average price of $4.66 per kilo, the price of Chinese tea averages $3.86 per kilo; Indian exports averaged $3.26 per kilo and Kenya’s

VOl.12 Issue 01 November 2016

Yu Lu with the China Chamber of Commerce for Import/Export of Foodstuffs provided key insights into the growth of the country’s tea industry.

Production was 2.28 million metric tons in 2015 growing at a compound annual rate of 9.2%. Exports are growing as well at 1.4% to 325,000 metric tons in 2015. “Export value is growing steadily to $1.38 billion in 2015,” she said. China is no longer seeking to compete with countries like Vietnam on the low end of the market. The three-year price of exported tea averages $1.64 per kilo in Vietnam. In China the three-year average has increased to $3.86 per kilo. China imported 23,000 metric tons of tea in 2015 indicating a brisk upsurge of 13.2% but paying only $110 million U.S. China’s

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tea imports are up 15.7% CAGR. Domestic consumption was 1.72 million metric tons. Only 33% of the population drinks tea daily, according to Yu Lu but the base grew from an estimated 443 million in 2014 to 471 million, up 6.3%.

China has a population of 1.367 billion people. Tea for home use is still relatively expensive for much of the country. Bulk tea is sold at prices ranging from 400 to 1000 RMB per kilo ($62 to $155 per kilo).

Iran’s Mitra Mobayen, told attendees annual consumption of 1.4 kilos per person in the country of 78 million was sufficient to sustain the domestic industry.

It will take some time to modernize and secure traditional export partners who long ago turned to other suppliers.

During the past 10 years, the “harvest and cultivation unfortunately has been decreased due to climate and economic efficiency” but he predicted a return to global prominence.

tea drinkers followed by iced tea at 51%.

Single serve capsules account for 13% of dry tea sales. Last year RTD tea generated $5.56 billion in sales.

Challenges for the Indian Industry Fluctuations in the Production due to climatic changes – Climate that is conducive to tea growth is one in which there is sunlight during the day and rain at night on an almost daily basis. Although the quantum of rain has not changed much, the frequency has reduced and the rise

The US is now the world’s third largest tea importer, closing in on Pakistan.

During 2010-14 the aggregate value of imported tea rose 17% to average $3,439 per ton. But the volume of tea imported into the US rose only 2% during the 201014 period, according to Packaged Facts.

Hot tea is prepared at home by 54% of

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COVER STORY in temperature has adversely affected photosynthesis in the plants. These climatic changes have resulted in lower crops as well as a higher incidence of pests and diseases and yields are showing a downward and erratic trend. The production of tea is not same round the year.

There is a wide variation in the monthly production of tea.

Although total tea production in south India is less, but as far as the productivity is concerned they are better than rest of the country because of the climatic condition of the Southern states. In North India, there is a dormant winter period, therefore, the growth of tea bushes stopped and hence the productivity goes down considerably. Climatic conditions not only affect the productivity but also the quality of leaves harvested.

Slower pace of re-plantation – India’s productivity has not picked growth due to slower pace of re-plantation of old bushes. With no substantial increase in tea acreage the increase in productivity can be achieved through the re-plantation of old bushes. Lack of bush replantation and rejuvenation of bush health are major deterrents for Indian tea production. Over 1,48,305 hectare or 37% of entire Indian

22 www.agronfoodprocessing.com tea land is hosting bushes over 50 years of age those which have crossed their optimum producing age. Compared to that, over 70% tea land in Kenya and 68% in Srilanka are with bushes less than 40 years old. Entire tea plantation in Vietnam is less than 20 years old and near 35% of Chinese tea plantation is less than 10 years old.

High cost of production and low productivity – The production entails risk on account of weather conditions and falling prices. Labour cost is quite high since hand picking of tea is labour intensive. To reduce the cost, some plantations are resorting to longer picking cycles; say 15 to 18 days against the ideal 10 days. On top of this, they are also harvesting three or even four leave which is resulting in poor quality and is fetching low prices. The ideal is two leaves and a bud. The high cost of production is affecting the Assam tea’s competitiveness in the global market.

Increasing competition in the Global Tea Market – India is a major exporter

COVER STORY

of CTC tea and faces stiff competition from Kenya. Demand for Kenyan teas is increasing due to relatively younger bushes which are of higher quality and is better suited for tea bags. Their labour costs are comparatively lower. Therefore, the tea industry in Kenya is more competitive than the Indian tea industry as is reflected by India’s diminishing leadership in key markets.

Coffee acting as a strong substitute to tea - Apart from the severe competition that the country is facing from other tea producing countries, coffee is emerging as near perfect substitute and is posing greater challenge to the consumption of tea as many coffee outlets have been opened by Barista, Cafe Coffee Day and others. The branded tea players must aggressively take on these challenges and their success will hinge on the supply of high quality premium tea as well as organic tea.

Outlook Indian tea industry is expected to cross turnover of nearly ` 34k crore by 2017

driven by upsurge in demand from domestic market. Consumption of tea has increased as compared to production and this will help in better price realization.

However, India needs to draw several initiatives in order to strengthen the stand in the global market and tap the potential market by improving the standards of plucking thereby enhancing the quality of the product sold. The export growth of the tea has been on a decline and this has resulted in lack of competitiveness in the global market.

New strategies aimed at adding value and reducing production and marketing costs are also needed. Value addition and diversification for a wide range of tea products need to be developed for balancing the supply demand scenario.

We believe that the Special Purpose Tea Fund (SPTF) set up by commerce ministry to implement uprooting and replanting programme would help in improving productivity and yield and thereby reduce cost in coming years.

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India's Packaged juice market

on its wheel

I

ndia’s packaged juice market has charted a high growth trajectory, thanks to its easy availability, anytimeanywhere consumption, and convenience.

Within the beverages market, the fruitbased beverages category is one of the fastest growing categories, and has grown at a CAGR of over 30 per cent over the

past decade. As of March 2013, the Indian packaged juices market was valued at Rs 1,100 crore (~USD 200 million) and projected to grow at a CAGR of ~15 per cent over the next three years.

The Indian juice industry was pegged at US$3.5 billion in 2012 and is estimated to reach US$21.14 billion by 2018. The per

VOl.12 Issue 01 November 2016

SPECIAL FEATURE

capita consumption of fruit juice-based beverage is 45 litre in Germany, 42.5 litre in Switzerland and 39 litre in the US. In India, the per capita consumption is just 20 ml, which is negligible compared to other countries. Hence, there exists huge untapped potential in this segment.

Shift in consumer preference towards non-carbonated fruit beverages, raising concern over obesity and other health issues, a change in lifestyle, affordability and availability of packaged juices are some of the reasons behind the rise of the packaged fruit juice market. They are slowly becoming a staple part of family breakfast, and even a must at social dos.

The untapped markets in the tier-II and

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VOl.12 Issue 01 November 2016

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SPECIAL FEATURE players.

“The juice segment in India is still an unorganised market. I am part of a niche crowd, which is very health conscious.

And if I look at the competition in the market, I honestly feel that I do not have a real competitor in the market. First two years of my business was to let the product and logistics in place and I have not even started on sharing the market share presently,” adds Sinha.

tier-III cities can be epicentre of growth for this sector as people in these cities still prefer fresh juices over packaged ones.

because of the country's lack of adequate cold storage facilities and refrigerated transport.

The packaged fruit juices market can be divided into three sub-categories: fruit drinks, juices, and nectar drinks. Fruit drinks, which have a maximum of 30 per cent fruit content, are the highest-selling category, with a 60 per cent share of the market. Frooti, Jumpin, Maaza, etc. are the most popular products in this category.

Fruit juices, on the other hand, are 100 per cent composed of fruit content, and claim a 30 per cent market share at present. In contrast, nectar drinks have between 25 and 90 per cent fruit content, but account for only about 10 per cent of the market.

Organised v/s Unorganised The juice business in India is highly dominated by unorganised players with over 75 per cent market share. The organised retail which has only 25 per cent of the business comprises of juice bars, juice cafes and packaged juice

The rising number of health-conscious consumers is giving a boost to fruit juices; it has been observed that consumers are shifting from fruit-based drinks to fruit juices as they consider the latter a healthier breakfast/snack option.

Prime Minister Narendra Modi also suggested that multinational cola giants should help augment fruit sales for Indian farmers by adding fresh fruit juices to their fizzy drinks. India, the world's second-largest producer of fruits and vegetables, throws away fresh produce worth millions of dollars every year

VOl.12 Issue 01 November 2016

Meanwhile, HAS Juice Bars which started its first juice bar in 2007 has 11 outlets in Mumbai. Speaking on the same, Director Hemaang Bhhatt says, “We started our first juice bar in 2007. So far, we have 11 outlets in Mumbai. Though we were slow on expansion initially, but before opening a new outlet, we want to ensure that the previous outlet is profitable in terms of process and scalability.”

Current Scenario The growing trend of fitness and keeping oneself healthy is driving the juice business in India. Over the last five years, the country has seen juice bars and juice cafes opening in India.

On one hand, local players are expanding their wings and signing deals with the global majors to start their business in

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SPECIAL FEATURE increased health awareness, hygiene concerns, growing category of informed buyers, rising disposable incomes, booming modern retail, habitual purchase, and introduction to new flavours.

Growth drivers Rise in the disposable income, people adapting the western culture, health awareness and import of fruits to India are among the top most factors to drive the juice business in India.

Over the years, we have seen that people no more stick to eating traditional foods.

They have become experimental in terms of trying out new, they are travelling more, and they have grown an appetite of West among themselves.

India and on the other hand, beverages major like PepsiCo, Coca Cola and Manpasand are investing heavily into packaged juice business.

At the same, Dabur is the market leader in the Indian packaged juices market, with its brands Real and Real Active having 55 per cent share in the packaged juices market followed by PepsiCo with a 30 per cent share.

“Beverages segment is the most profitable business in India as the juice market stands at Rs 1,200 crore today.

Beverage business has very small model, but the output is same in comparison to a restaurant brand,” says Rivoli Sinha, Founder Director, Joost Juice Bars, which is a master-franchisee for Boost Juice in India.

Dabur is the market leader in the Indian packaged juices market with its brands Real and Real Active.

Other players include Parle, Fresh Gold, and Godrej. Some of the other brands of fruit juices and drinks include Frooti, Appy, Mazza, Minute Maid, Slice, Fresh Gold, and Del Monte. Considering the attractiveness of the segment, diversified consumer food companies such as ITC are working towards making a foray into packaged juices.

Meanwhile, ITC Ltd, one of the biggest FMCG majors is planning to invest Rs 1,000 crore in dairy and juice businesses.

The group has also acquired Bangalorebased B Natural juices to tap the fastgrowing juice business in India. The company is planning to enter into both 100 per cent juices and nectars with 7-8 variants.

As per studies, the most preferred pack size is the individual (small) pack which is convenient, and easy to carry and consume. These are in great demand as out-of-home consumption is on the rise. Tetrapaks are most popular among manufacturers as well as consumers.

Some companies are also offering their products in tins (eg Del Monte) and PET bottles (egMazza); however, they are more expensive than Tetrapaks, which adds to production costs, and, as a result, affects the market price.

Fruit juices have created a space for themselves in regular household menus, as a part of a family’s breakfast, social gatherings, and evening snacks. As a result, consumers are picking up multiple family packs at one go, which is an emerging consumption trend.

There are several reasons behind the growth of the Indian packaged juices category: Changing consumer lifestyles,

VOl.12 Issue 01 November 2016

“Emerging trends like increased preference on wellness, the desire to spend extra on health and maintaining healthy lifestyle, especially in the middle class and strengthening Indian economy, which offers more disposable income to the masses are major catalysts that drives strong growth of the nonalcoholic beverages market in India,” shares Dhirendra Singh, MD, Manpasand Beverages.

“We were witnessing that Indians are adopting western style of living and eating habits. At the same time, fruit is an inherent property which can cure a lot of disease and improve the immune system of human body. So, that’s where the idea came in my mind. I think that juice has become a substitute to food today. At the same time, it is a quick bite, saves time and gives all the required nutrition to the body,” adds Bhatt.

Packaged juices are gradually cementing their place in the urban household in the metros and tier I cities; however, replicating the same success in tier II and III cities is still a struggle as residents in these regions still prefer fresh juices over packaged ones because they are comparatively cheaper, and also in sync with the traditional belief that juices are best consumed freshly pressed.

Manufacturers are also adopting a

28 www.agronfoodprocessing.com are preferred over bottles by the younger generation. Fruit juice companies are also trying to rope in popular Indian movie stars or sports personalities as brand ambassadors for their products as part of a proven marketing strategy. The growing trend of fitness and keeping one self healthy is driving the juice business in India. Over the last five years, the country has seen juice bars and juice cafes opening in India

number of other strategies to attract more consumers. Some companies are planning to launch fruit juices in cans that

It is appropriate to say that the packaged juices market in India is still evolving. As there are many national and international brands on the verge of succeeding and expanding further into the field, new entrants can also cash in on this opportunity by positioning/promoting packaged and bottled fruit juices as part of the consumers’ daily diet. Simultaneously, it is critical to ensure affordability for consumers, while maintaining the hygienic aspects and quality of products throughout the year.

The fruit juice market is one of the fastest

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SPECIAL FEATURE growing categories in the beverages segment growing at a CAGR of over 25- 30 per cent over the past decade. According to a consulting firm Technopak, the Indian packaged juices market is valued at Rs 1,100 crore ($200 million) and is projected to grow at a CAGR of ~15 per cent over the next three years.

Way ahead Today every player in the segment is trying something. They are coming up with new flavours and tastes to meet the demand of their customers. Sourcing and growing the fresh food and vegetables have become the main strategy for these players.

ITC, PepsiCo and Coca Cola are signing great deals to enter and flourish their juice business. Manpasand Beverages, which started its operation in the year 1998, has crossed Rs 240 crore during the financial year 2012-13 with strong growth rate of 35-40 per cent per annum.

In May 2014, Hindustan Coca Cola

29 www.agronfoodprocessing.com Beverages announced that it aims to start mango juice business in partnership with Jain Irrigation after success of mango farming initiative 'Unnati' launched in 2011.

Both the partners plan to invest Rs 50 crore over the next 10 years to boost mango production by using the Ultra High Density Plantation (UHDP) technology with the involvement of about 25,000 farmers in an area of 50,000 acres.

On the other hand, ITC Ltd, one of the biggest FMCG major in the company is planning to invest Rs 1000 crore in dairy and juice business. The group has also acquired Bangalore-based B Natural juices to tap the fastgrowing juice business in India. The company is planning to enter both 100 per cent juices and nectars with 7-8 variants. “ITC will soon roll out juices across the country, whereas, the entry into dairy business will be in the late next quarter.

We plan to regionalise both juices and dairy products,� shares Chitranjan Dar, CEO, Foods, ITC. Thus, we can say that Indian juice markets are heavily pouring profits into the business with participation of new as well as existing players in the market. In the years to come, we can see players working upon unique strategies to make their products more popular.

The Indian non-alcoholic market is currently estimated to be around Rs 50,000 crore, which includes mineral water, fruit juices, soft drinks, dairy drinks and hot beverages among others.

The fruit juice market is roughly around 10 per cent of the Indian non-alcoholic beverages market and is expected to grow by 35-40 per cent in the near future.

Among all challenges, it is difficult to control the cost of production at the price points of juices, primarily because of rising food inflation.

The continuous, year-long supply of raw materials, and the non-stop production of juices for the full season, is another production-linked issue which needs to be managed carefully. Also of vital importance is controlling transportation and logistics costs.

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SPECIAL FEATURE

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Indian imported food market: Growth, Opportunities & Challenges

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IMPORTED FOOD

A

few years ago, gourmet and imported products were only available in dedicated shops.

The range of different products was very small and they were only accessible for the highest class of the population. The Indian market has come a long way since then. Consumers today have more choice than ever and the range of imported food

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IMPORTED FOOD total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. It contributes around 14 per cent of manufacturing Gross Domestic Product (GDP), 13 per cent of India’s exports and six per cent of total industrial investment. Indian food service industry is expected to reach US$ 78 billion by 2018.The Indian gourmet food market is currently valued at US$ 1.3 billion and is growing at a Compound Annual Growth Rate (CAGR) of 20 per cent. India's organic food market is expected to increase by three times by 2020.

is growing very fast every year. From pasta, olive oils and herbs to sweets, chocolates and cheeses, all gourmet products categories increase in the market with double figures for the last 8 years and they are not ready to stop especially with the opening in September 2012 of the FDI in the retail market.

When international products came to India they were niche products. The only access consumers had to taste international foods was in restaurants, but now, everything has changed.

Globalisation, rising disposal income and aspirations, consumer awareness and changing tastes made the demand rise for international foods all over India.

Many stores started to stock imported food or create a corner in their shops with a proper marketing to attract the clients in these new categories. Nowadays, people want to find these products in store shelves and they want to cook them at home. Consumers are following food show on TV, downloading recipes online and post lots of reviews and comments on food blogs and others food websites.

They are educated and familiar with many American, Mexican, Japanese, Lebanese and Mediterranean recipes.

The food industry, which is currently

valued at US$ 39.71 billion! is expected to grow at a Compounded Annual Growth Rate (CAGR) of 11 per cent to US$65.4 billion by 2018. Food and grocery account for around 31 per cent of India’s consumption basket.

Accounting for about 32 per cent of the country’s total food market, The Government of India has been instrumental in the growth and development of the food processing industry. The government through the Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments in the business. It has approved proposals for joint ventures (JV), foreign collaborations, industrial licenses and 100 per cent export oriented units.

Market Size The Indian food and grocery market is the world’s sixth largest, with retail contributing 70 per cent of the sales. Food has also been one of the largest segments in India's retail sector, which was valued at US$ 490 billion in 2013. The Indian food retail market is expected to reach Rs 61 lakh crore (US$ 894.98 billion) by 2020.

The Indian food processing industry accounts for 32 per cent of the country’s

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The changing trends of the market It’s a fact that imported food is growing in popularity among the Indian consumers.

The consequence is that the market is changing especially for domestic manufacturers. As consumers ask for more and more international foods, manufacturers in India have no choice to develop similar categories to be competitive in the market. They have the advantage to see what kind of imported products is accepted by the consumers, and take the opportunity to introduce similar products or flavours.

The packaged food category is growing at a fast pace in the country. This segment witnessed a growth of 45% over the last year. Sauces, pastas, chocolates & cocoa products are the major drivers of imported packaged food segment. Chocolates & cocoa products contribute 55% of the total packaged imported food market in India. Singapore, Malaysia, Netherlands & Italy are the major destinations for chocolates & cocoa preparation in India.

The four countries contribute for ~60% of the total imports. Singapore has witnessed 100% growth in demand as compared to the Indian market followed

by Italy & Netherland, which have witnessed a demand growth of 60% & 55% respectively.

The example of pasta is very representative of that tendency. 5 years ago there were no pasta manufacturers in India. With the success of the product thanks first to Italian restaurants and

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IMPORTED FOOD

high customs duties, the monopoly of distribution and marketing own by each State and the heavy registration process, imported wines Retail space for imported foods has been increasing With the development of modern format in the retail market, space for imported food has been increasing over the years.

Based on an average size, imported foods take up 15-20% of the total organised retail space except for retailers which are dedicated to international products!

then importers, we have now the Indian Sunfeast brand which has a bigger success in the market than imported pasta. With the same idea, before Lays decided to manufacture chips in India, the American brand Pringles imported sour cream and onion flavoured potato chips.

Importers play a huge role in the opening of the market for new food products. They offer a variety of choices to the consumer and introduce products which don’t exist in India.

New categories are rising and India opens to international recipes. For example, before Monin was launched, there was no clear market for cocktails, mocktails or coffee syrups. This encourages domestic manufacturers to become innovative!

Kellogg’s introduced strawberry flavour in cornflakes in India only after consumers discovered it through imports and developed a liking for it.

The modern trade shopper is one who has stronger purchasing power and a willingness to buy a wider repertoire of categories and brands. This mix of affluence and experimentation is an invaluable asset for manufacturers seeking to introduce, grow and create categories.

The leading categories in the market are

still a rising category. With 35 million consumers, the market is at the beginning and conquers every year many more wine fans. French wines lead the Indian imported wines, followed by Italy, Australia, California and Argentina.

Together they represent almost 65% of the total imported wine in India.

The packaged food is an emerging category in the market. Sauces and chocolates are driving this segment.

60% of the total packaged imported food market is dominated by chocolate products. Italy, Netherlands and Malaysia lead the imported chocolate market and together, these countries represent around 60% of the total imports.

The largest categories of imported foods remain fruits, vegetables and nuts which represent more than 80% of the total food and wine imports.

The leading category under imported foods is dairy products with cheese, creams and dips. This market for dairy products has increased of more than 140% in 2013 with products which come from Australia, Europe, USA and New Zealand.

The imported wine market is also a fastgrowing market in India. Despite the

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The imported food market is becoming more and more competitive and retailers are asking for higher margins from importers. The category of gourmet products is actively promoting by retailers through various in-store marketing such as food festivals, tasting sessions into the stores.

Retailers follow the consumption trends and adjust the merchandise assortment, pricing and marketing strategies accordingly. The main target is building loyalty and driving volumes through promotional activities.

The profile of the consumer who purchases that kind of food is between the age group of 22 to 40 years and middle and uppermiddle class women. That consumer is always looking for new international products, instant food and organic food.

Rising Category New companies are coming into the international food market, eager to bring the next big product in India. For example liquid smoke is the kind of product just a few would have heard in India. That liquid smoke allows consumers to get a barbecue flavour even without any outdoor cooking or smoking.

Many products are born out of innovative food technologies that have emerged in others countries over the last few years.

The Indian consumer’s palate is becoming more experimental but although it’s evolving with consumer education and the creation of greater awareness is the key to achieve deeper market penetration.

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IMPORTED FOOD support make in India programme," he said.

Walmart India operates stores in nine states across the country. In the next five years, it is planning to add 50 more stores, taking the total number to 70.

"We continue to focus on Tier II and Tier III cities, and the opportunities here are as good as metro towns," Iyer said, adding that availability of land is a challenge in metros but the company continues to look for good options.

Companies specialised in processed food items such as cake decorations, pastries, fondant, marzipan, cake sprinkles, chocolates and non-alcoholic beverages are entering in the market. Companies are looking for products that would make life easier for the consumer, things that are convenient and easy to cook/eat, but also attractive and affordable.

Walmart India is evaluating policy guidelines to come up with a "foodonly" retail model, after the government has allowed 100 per cent foreign direct investment in food retail. So, we need to conceptualize, evaluate and come up with a model, which takes time," Walmart India CEO Krish Iyer said, and "It is not something we will jump into very quickly," he added.

particularly mom-and-pop stores are the most important channel for Walmart.

"Our e-commerce (B2B) experience has been good, and while we do not speak about the e-commerce sales, more than 50 per cent of buying is digitally influenced," he said.

Walmart India has two private labels Member's Mark and Right Buy and it is focusing on private labels, however, customer buying proposition is more crucial. "The idea of private labels is to

For Walmart India, food retail in the cash and carry business accounts for more than 65 per cent of business, he said.

Iyer also added that the government's move to open food retail to investment, will benefit all the stakeholders including retailers, consumers, and farmers, and it will also increase access to capital, which will promote retail enterprise.

"Particularly looking at the importance of food, we do believe that we will continue to focus a lot more on food in our cash and carry stores and he added that resellers,

VOl.12 Issue 01 November 2016

Government initiative After the visit of Hrasimrat Kaur Badal (Minister of Food Processing) to UK France and Italy, several big retailers in the UK including Tesco, Sainsbury's, Marks & Spencer, Partridges and Waitrose are keen to enter the food retail business in partnership with local players.

Addressing conference on foreign direct investment (FDI) in marketing of food products and promotion of exports organised jointly by industry body CII and the ministry of food processing, minister told that Tesco wants to tie up with big giant retailer or someone who has been in the business while the other players like Harrods, Partridges, Simply

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IMPORTED FOOD Food Processing Industries would be providing hand-holding and facilitation for all foreign investors who would like to invest in the food processing sector in the country," an official statement said.

She said there are opportunities in the mega food parks in India wherein foreign investors could set up units immediately and take advantage of 100 per cent FDI in trading of food products manufactured and produced here.

Food and Marks & Spencer, who want to come in the niche, quality market, are looking at different sort of players.

Badal, who has just come back from the UK after a successful sales pitch for FDI in food retail, will now visit Italy on September 28-29 to seek investments and collaborations in food retail.

"Walmart has said how they are expanding their business from 20 stores going for 50 stores. That proves fact that market is there and ready to happen," she said.

Badal said the world was looking at India as the food factory to the globe, saying global companies in food and retail are no longer looking to import just tea, coffee and rice from India. "I see that as a good opportunity. I suggested to these companies that everyone talks of basmati rice but why not basmati with saffron flavour or buying litchis and other varieties of mangoes apart from Alphonso," she said.

In June, Government allowed 100% foreign investment in processed food retailing provided they are manufactured in India that will help retailers such as Marks & Spencer, Tesco, Walmart and IKEA to set up food-only retail outlets.

In 2013, India allowed 51% FDI in multi-brand retailing but such ventures come with a host of riders such as 30%

mandatory local sourcing, $100 million upfront investment and half of it in backend infrastructure. With the new ruling in the budget, retailers can sell their own food products without any restriction if they are produced within the country, government officials said.

In 2012, while approving IKEA's Rs 10,500-crore investment proposal, the Foreign Investment Promotional Board (FIPB), the agency that clears all foreign investments in the country, it struck down IKEA's plans to set up its famous cafes in the stores citing laws that don't allow FDI in food. Later the government gave approval to IKEA to set up restaurants as part of its stores only to be consumer in the stores.

Recently, Badal met the Ambassadors/ High Commissioners/representatives of the countries viz. UAE, Germany, France, Poland, Australia, Italy, Netherlands, Indonesia, South Korea, Thailand, Canada, China, New Zealand, Brazil, USA, UK, Russia, Japan, Malaysia & Belgium and explained to them the vast opportunities that have arisen in India for foreign food retailers and food manufacturers as a result of the recently announced 100% FDI in trading, including e-commerce, in respect of food products manufactured and/or produced in India Badal also shared that the Ministry of

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Challenges for New Companies High import duties & aligned tariffs A high import duty on majority of food items along with the non-tariff barrier continues to create an obstruction for importers and manufacturers. The added cost gets transferred to the consumer & hinders the adoption of imported food.

The import duty structure ranges from 26% to 74% for imported food & wine segment in India. Regular interventions & recommendations are made towards lowering the duties by different importers associations and trade commissions.

However, the Indian government has intervened by amending the duty structure of various food items from time to time, depending upon market conditions and requirements. Food inflation has also lowered some import duties resulting in an almost negligible import duty on wheat, rice, corn and crude vegetable oils.

The applicable duties cover basic duty, Countervailing Duty (CVD) & Special Additional Duty (SAD) or special CVD. Lack of infrastructure support resulting in high lead time.

The poor infrastructure support in terms of transport & storage facility acts as one of the major laggards for imported food segment. The integrated cold chain framework is still at a nascent stage in India and the huge demand & supply gap of support infrastructure acts as a constraint in the supply chain of imported goods.

Supply chain constraints blocking the reach beyond metros & mini metro Majority of India lives in rural & semiurban areas, the supply chain constraints coupled with poor infrastructure support

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IMPORTED FOOD food basket of the world; it leads the production charts in the perishables & grains category. However the level of processing is low but it has picked up in the recent past & the industry is witnessing a year on year growth of 7-10%. Indian manufacturers are much aligned with the consumer’s need, as the offerings are more cost competitive, than imported products. Availability of similar or better quality products continues to serve as a challenge for imported goods in India. On the other hand, better quality imported produce also sets a benchmark for Indian manufacturers to raise the quality level matching the cost effectiveness.

makes it impossible to reach such markets. The huge chunk of Indian consumers remains untapped resulting in poor growth of the segment. Factually the target segment of imported food houses in metros & mini metros, however if the support infrastructure is in place, the market can be expanded to other cities.

Stringent Food laws For international manufacturers India is a land of stringent food laws which makes it very difficult to enter & sustain in the Indian market. Various Ministries abide by various rules & regulations to ensure entry & availability of safe products for the consumers. Exporters have to follow an array of food laws covering use of additives and colors, labeling requirements, packaging, weights and measures, shelf-life and phyto-sanitary regulations. To consolidate different laws pertaining to food & aligned products, Government of India has framed “Food Safety and Standards Act, 2006” (FSSA).

It concentrates on consolidating various food laws and works as single regulatory agency in place of current multiple regulatory agencies.

Diverse food habits across the nation Food is like a religion in India, the different cultures make it a home for an array of cuisines. The nation is known

for diversified & distinct food habits throughout the globe. The assorted food habits work as an opportunity as well as a challenge for food manufacturers sitting abroad. Customizing the product offering according to the Indian platter has gained popularity in recent times, but the same is limited to food services. Catering to the diversified food habits & fulfilling the expectations in terms of quality & affordability will remain as a laggard for the imported food segment in India.

Preference for fresh and traditional foods “Fresh is better” serves as a cacophony for food processors in India. Apart from such misconceptions, the Indian consumer is also still very much aligned with traditional food, depending on region & culture. The awareness level & adoption of processed and packaged food as safe choices are picking up in India, but still serve as a challenge.

Affordability Vs Availability of similar or better products at competitive prices India serves as the

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Even while consumer demand is attracting new companies and many new brands, operating in the Indian market remains challenging. The distribution network and the regulatory system are the two main reasons why international companies are still hesitant to enter into the market.

The regulators have forgotten that the systems have been formulated for the benefit of the people in general. Even though FSSAI has good intentions, the procedure is too complicated, making business inefficient and increasing costs.

Despite the challenges, Indian market holds immense potential, and therefore, cannot be ignored. Modern food retailing has been late to make its foray into India, and has had a few hiccups along the way, but the sector will make rapid inroads in the years to come.

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Short, long, curved, twisted

and scrumptious

The Indian Pasta Industry

FEATURE STORY

W

hile not everyone knows the difference between farfalle, fettuccine and fusilli, many people have slurped over a bowl of spaghetti Bolognese or tucked into a plate of lasagna.

A global survey by Oxfam has named

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FEATURE STORY

pasta as the world's most popular dish, ahead of meat, rice and pizza. As well as being popular in unsurprising European countries, pasta was one of the favorites in the Philippines, Guatemala, Brazil and South Africa.

Organisation show Venezuela is the largest consumer of pasta, after Italy.

Tunisia, Chile and Peru also feature in the top 10, while Mexicans, Argentineans and Bolivians all eat more pasta than the British.

It's because it is cheap, versatile and convenient. "You can create lots of different dishes with it. It tastes good and it's filling. It also has a long shelf life, so you can keep it in the larder until you need to put a meal together."

And figures from the International Pasta

So how did pasta become so popular?

But that's only part of its success. Pasta is

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FEATURE STORY Pastas are of different varieties and shape- dry pasta and fresh pasta. In dry pasta, it can be produced with semolina or soft wheat-flour material. Soft-wheat flour is very common in most of the countries. Also we have shortcut and long-cut pasta, and in both there are many different shapes.

In Long-cut, there are long shapes like spaghetti, bucatini, capellini and in short-cut pasta there is macaroni, tube, fusilli, any short shape can be made out of it.

also relatively easy to mass produce and transport around the world, making it a popular product with food companies as well.

The universal popularity of Italian cuisine and the emergence of organized retail have boosted the consumption of imported pasta in India. The market size of pasta is expected to grow by 25-30% annually.

Barilla, De Cecco and San Remo are the most popular brands of imported pastas in the USD 14 million to USD 15 millionworth Indian market.

Celeste Zanotto, Sales Manager, TECALIT affirmed that as Italy is a major consumer of pasta, soon India will also have a high consumption rate, this is because Pasta is wheat-based and people are fond of the different varieties available in terms of shapes like shells, fusilli, spaghetti, lasagna and short-cut pasta as well as longcut pasta. Indians popularly consume vermicelli pasta and there are different types and shapes of pasta that are available, he added.

TECALIT provides high quality facilities and manufacturing equipment for Pasta and snacks industry around the world. Since 1984,. TECALIT specializes in the design, manufacture,

Outlook of the Indian pasta industry The consumption of pasta in India has surely increased because consumers consider it a healthy food item and easyto-cook; also it is available at a reasonable price as compared to other products. The simple and easy-to-cook method is a key driver as you just have to put it in boiling water and add any sauce to it; also you could add any other ingredients to make it more delicious.

The trend is that the food industry is looking at pasta with good business opportunities. There are many clients who are in completely different food divisions that wish to include pasta on their list.

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supply and commissioning of pasta thus achieving the goal of developing new cutting-edge technologies, effective and efficient. It provides lines for the production of all types of dry pasta, the short pasta, to the long pasta.

Marco Ravera, Anselmo, Commercial Manager said, ‘’The Indian pasta market is growing, as the consumption rate is increasing and there is special demand for short-cut pasta and the key drivers for this growth is that it is a very nutritious product, and is produced locally. When a client imports this product, then they are unable to propose the right price on the shelf’’.

Anselmo manufactures reliable systems and equipment to make pasta of the highest quality, right automatic lines for pasta. Systems that are maintenance-free for the first 10 years and ensures lower energy consumption.

The idea was to offer solutions not only to restore the original operating conditions lost over time due to wear or obsolete components, but also to improve the performance of existing lines, with structural interventions on the weakest components or devices.

Ruchi, Pavan Group, compared the pasta market with the noodle market and said that because of noodles industry and

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FEATURE STORY I think it’s the youth – the generation, emphasised Ruchi, adding on that the India’s entire population, 60 per cent are below the age of 30 and they are the ones who have been growing with pasta. They do not want chapatis rather they prefer to eat pizza pasta. In semi-urban areas, the lifestyle is changing and youngsters go out more often. Now it’s natural for them to go out daily and eat something.

Pasta is a trend, pasta is a food that satisfies not only the taste buds but the hunger too, pasta is fashion for some and scrumptious for some. In fact the elderly also have passion for this Italian food and India is poised to become the next big past consumer, if the thing goes on like this.

its changing dimensions and with steam noodles coming in the forefront, the alternative to steam noodles is pasta.

and Malawi are having pasta as compared to their local foods. I can see the same trend here’’, he said.

In terms of manufacturing also, it has become an easy option versus noodles.

There is less of quality infrastructure manufacturing available to pasta then to noodles manufacturing.

Pavan Group are specialized leaders with 60 years of experience in the design and engineering of technologies for the food industry, providing integrated solutions made of ideas, innovation and expertise, from the handling of raw materials to the packaged product.

Key drivers of this growth

‘’First it was noodles versus pasta in India, where pasta is becoming a favourite as many are travelling and they know how to make it. Everyone is aware of the nutritional value of pasta, there are sauces available and variety of dishes can be prepared with it. Pasta is actually wheat flour, so it is an alternative to chapatis’’, established Ruchi.

Ruchi also added that , a lot of people ask why is it considered healthy, the answer is simple because of the raw material, wheat flour – you can give your children pasta if they do not want to eat chapatis. So pasta is still growing and will establish itself has a health brand in this decade.

The consumption has increased, and where we will surpass the Italians in the next 10 years only time can tell, conceded Ruchi, but chances are there. ‘’Like Africa is a big Pasta consumer; African people have changed to pasta from their staple food. Places like Mozambique

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The key drivers for this growth is that it is a very nutritious product, and is produced locally, informed Marco Ravera, and added, ‘’We see immense opportunities in India and would be open to the business proposals by companies who want to venture in the pasta industry, When a client imports this product, then they are unable to propose the right price on the shelf’’.

The other growth factor is that Pasta is simple and easy-to-cook as you just have

40 www.agronfoodprocessing.com to put it in boiling water and add any sauce to it, also you could add any other ingredients to make it more delicious, added Celeste Zanotto.

erupt. Where imported player have upper hand in quality, packaging and quantity the distribution factor is in favor of the local players.

The easy way to cook is another reason why many household is adopting it as a staple food, especially the ones where both partners are working and easy cooking is an intelligent option. Definitely pasta justifies the category alongside being delicious and fulfilling.

‘’A local brand will enjoy distribution everywhere as compared to the imported ones who do not know how to reach. The local ones will always have an upper hand in terms of distribution’’, admonished Ruchi.

Leading pasta players In India, MTR and Bambino are popular brands that have become household names, but now looking at the market even imported pasta has gained prominence.

Imported pasta products help us identify how packaging should be like.

According to Zanotto, India has a big territory, and has strong association of manufacturers who can compete with the imported players. It is always that

‘’The challenge that lies ahead is to produce good, nutritious pasta at an economical price’’, he stressed.

Competition amid challenges As the pasta market will grow competition in conjunction with challenges would

Challenges faced by the Indian pasta industry Technology! I think the fact that no one wants to streamline themselves is great threat to the Indian pasta industry, stated Ruchi. They do not understand the technological hazard of not following the given norms and regulations by the industry and furthermore, they do not consider food safety and contamination as an issue.

The local market has to develop itself first. Indian investors should invest in our pasta equipment so that they receive the best results and have a successful reign in the market, added Ravera.

Speaking in the same line, Zanotto agreed that few Indian companies like Haldiram, Bambino are leading pasta players, and now some more companies are investing in pasta products.

According to Ravero, there are big names in India who are popular pasta producers and in near future as the market will grow; there will be several companies that would be leading brands facing healthy competition with each other.

On whole the present scenario depicts that the international players do face competition with the local pasta brands as the distribution system is mostly in hands of the local brands and this is the point where the global brands stagger.

‘’This is a really big problem. Indian pasta industry still has a long way to go in terms of hygiene, quality, contamination and nutrition, he added.

‘’Our packaging is still at a growing stage. In retail stores, when we peg an Indian brand versus imported brand, the consumer wants the same thing in the Indian brand with a different pricing’’ evaluated Ruchi

The Competition with the international brand is nascent and the market will improve with time, as price plays an important role in Indian homes. Even now the price of Indian manufactured pasta is way below the international pasta, and this means a lot for an average Indian.

FEATURE STORY

the domestic brands have greater benefits because they are well-versed with India’s regions and market.

While Ravera thinks that in near future as the market grows, there will be several companies that would be leading brands facing healthy competition with each other. The challenge that lies ahead is to produce good, nutritious pasta at an economical price. ‘’We see immense opportunities in India and would be open to the business proposals by companies who want to venture in the pasta industry’’ informed on personal level.

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Future trends We see immense opportunities in India and would be open to the business proposals by companies who want to venture in the pasta industry, said Zanotto.

And there are big names in India who are popular pasta producers. Also in near future as the market grows, there will be several companies that would be leading brands facing healthy competition with each other. The challenge that lies ahead is to produce good, nutritious pasta at an economical price.

Pavan is indianising pasta as well; even instant pasta will be indianized. No more do we want to use Alfredo sauce, rather we want curries in our pasta, stated Ruchi, There are no way out, other than indianising the pasta products to create strong customer base, said Ruchi.

The future of pasta industry is very prospective, the growth is positive, the market is strong and the competition is up.

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TOMATINA

The word tomato comes from the Aztec “tomatl”, literally means "the swelling fruit".

Tomato is one very important ingredient used in the Indian cuisine. These lovely red cute glossy shiny vegetable is almost used in every Indian curry that given a tangy taste to the dish.India is the second-largest tomato producer worldwide, with about 17 million tons produced and behind only China. But the gloomy part is that though being at the helm as a producer, less than 1% of India’s tomato production currently gets processed.

T

omatoes are an important crop for both the farmer and the consumer in India. With 11% share of global production, India produces more tomatoes than any other country, except China.

Despite this, less than 1% of India’s tomato production is processed, way below the average of 26% for the world’s top 10 tomato producing countries.

Tomato-based processed food consumption in India is growing at an annual rate of over 30% creating massive demand for existing processors like Hindustan Unilever and Nestle, ushering in the entry of new market players like Kagome and creating new prospects for product imports. Many of these processors are pursuing efforts to build

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up improved supply chain mechanisms to increase the share of locally-processed paste and other inputs for production in the wake of 30% customs duty now levied on imports. Specialized paste, pulp and juice processors like Capricorn Foods, Nijjar Agro Foods and Varun Agro are also raising production capacities by expanding their farmer cluster base and

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TOMATINA 41.37 million tonnes (MT) of tomato worldwide were processed into valueadded products in 2015. This is about 26% of global production of fresh tomato. By comparison, less than 1% of India’s tomato production currently gets processed into such products.

Globally, 33% of all tomato processing is undertaken in the US, mostly in California. An estimated 130,000 tonnes of tomato were processed in India in 2015, which is 0.3% of the global tomato processing market.

working with farmers to improve supply throughput by adopting better production practices. Seed companies like United Gene cs India are working on producing a range of specialized seed inputs suited for the Indian processing tomato market.

possible reduction in the availability of processed raw material like tomato paste as well as an upward trend in prices which will impact Indian processors that depend on imported inputs for some or all of their requirements.

Much of India’s tomatoes are grown by a large number of smallholder farmers with holdings of between 1-3 acres of land.

The southern and central states constitute much of India’s production including the states of Andhra Pradesh, Telangana, Karnataka and Maharashtra. Farmers typically sell to a local aggregator or to a trader in a regional mandi. The processing industry however seeks the agglomeration of a large number of farmers in closely-knit clusters to enable both a sustained supply of larger volumes of tomato to the processing unit and the maintenance of tomato product quality.

Current production methods adopted are focused on reducing crop risk through an excessive use of pesticides which, along with low yields, contributes towards increasing the price point at which farmers can sell to processors.

A series of measures to enhance the production of processing tomato in India and improved coordination across the value chain can assist in increasing supply access to processors and enhance production viability as well as creating more consistent returns to tomato growers.

2016 figures from the World Processing Tomato Council (WPTC) indicate a likely 8% drop in global production in processing tomato amongst major producers due to adverse climate conditions as well as other macro-economic factors. This suggests a

These strategies would include the availability of improved cultivars suitable for production more consistent with processing parameters, reduction in the cost of production, enabling sustainable tomato production through the two main seasons to maximize the use of processing capacity and facilitating more farmer clusters producing processing tomatoes thus raising aggregate production volumes and enabling the application of production practices that can have a wider impact on cost or production and quality including the possible use of mechanized harvesting.

Tomato Processing Industry According to the World Processing Tomato Council (WPTC), an estimated

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For the industrial market, tomato paste is an important product because it is used as the base for a wide range of other products. A wide range of value-added products are produced from tomatoes including tomato juice, paste, diced/ peeled tomatoes, strained tomato pulp, ketchup, pasta, pickles and pizza sauces, salsa, gravies, ready-to-eat (RTE) curries and tomato-based powder products.

Processed tomato products have wide applications in the household, food processing industry, snacks foods, hotels, restaurants and fast food retail chains.

The process involves washing and grading tomatoes and then boiling them in steam jacked kettles before pulping in a continuous pulper where skin and seeds are separated from the pulp. The filtered extracted pulp is the basic material from which other products are made.

The recovery of pulp varies from 40% to 50% depending upon the quality of tomatoes. To make juice, fresh tomatoes are crushed directly instead of boiling them prior to processing in stainless steel kettles.

The Indian Processed Tomato Market And Tomato Supply Chain India’s demand for processed tomato products is expanding at an estimated 30% annually driven by massive consumer demand for established products like pasta sauce and ketchup as well as new ready-to-eat products, gravies and bulk supplies to food retail chains including fast-food restaurants, hotel chains. There is also a significant increase in exports of

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TOMATINA habit, concentrated fruit set, and the joint less pedicel (fruit are easily detached from the plant) facilitate rapid hand harvesting or even mechanical fruit harvesting that lowers labor costs. Available processing varieties thus require significant breeding initiatives to enable them to adapt to local conditions.

processed tomato-based food products fueled in part by a burgeoning Indian diaspora. The Indian market is also witnessing strong product diversification with expansion into curry gravies, readyto-eat curries and dry powder mixes in addition to traditional products like ketchup, puree, juice and dried tomato.

A recent survey by ASSOCHAM (the Associated Chambers of Commerce of India) conducted in leading Indian cities indicates that the demand for tomato puree and ketchup has surged by 40% in 2016 due to surging fresh tomato prices and a trend towards easier-to-cook meals.

Retail price of tomatoes shot up to Rs 80100 during the month of June in several metros due to ghost supply from several southern states where the late season (May to July) harvest crop was damaged at the flowering stage by serious drought conditions.

India’s annual ketchup consumption is estimated at 13,000 tonnes with a market valuation of Rs 1.8 billion (US$ 28 million). Nestlé’s Maggi dominates the ketchup market with a 37% market share followed by Unilever’s Kissan (29%) and Heinz (10%).

Tomato paste production appears to be commercially viable when processing facilities are based in and around key Indian tomato growing areas. The typical financial model for a 4,500 TPA (tonnes per annum) paste unit involving a capital cost of Rs 5 to 6 million (US$800,000),

projects an IRR (Internal Rate of Return) of about 42% based on an operations window of 150 days in a year (presuming raw material availability for 4 months only).

Though the market for processed tomato products is expanding, the processing industry is confronted with the problem of limited supply of processing tomatoes.

Quality parameters for processing include color, total soluble solids, sugar content and firmness for which existing Indian tomato varieties currently available in India are considered unsuitable. The most popular market type for the fresh market is acidic, and highly suitable for curries and other common dishes. Processors are required to neutralize this acidity with increased dosage of sugar resulting in higher production costs. Despite the high potential for growing tomatoes, low yields increase the cost and the risk of growing tomatoes resulting in depressed farmer incomes.

Key challenges for developing tomato varieties suitable for processing comprise; a) Diseasesusceptibility, especially Tomato yellow leaf curls diseases caused by whitefly-transmitted begomoviruses; thrips-transmitted tospoviruses, bacterial wilt, and fungal diseases such as early and late blight; b) Low fruit set mainly due to high temperatures and c) unmarketable fruit yields due to poor color development, so ness, blossom end rot, cracking and other defects. Tomato varieties of compact plant

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Tomato quality depends on many factors such as cultivar, growing conditions and ripening on and on the vine. The physical and chemical characteristics of tomato also affect the quality of processed product and to facilitate farmer involvement in growing tomatoes for processing, high yield coupled with good processing qualities need to be combined in the varieties available to the farmer.

The desirable qualities for a processing tomato cultivar include high total soluble solids (5-6 Brix), acidity not less than 0.4%, pH less than 4.5, uniform red color with a/b color value of at least 2, smooth surface,free from wrinkles, small core, firm flesh and uniform ripening.

Other physical characteristics sought by processors are fruit weight be at least 50 g, to be spotless and disease free.

Processors seek reliable and consistent sourcing of tomatoes meeting quality standards at an acceptable price and in the volumes desired to enable op mum capacity utilization. Volatility in production levels and variations in harvesting contribute to price swings and provide a challenge for processors to maintain sustained plant operations.

Indian tomato value-added manufacturers have found it difficult to procure the requisite volumes of paste concentrate and pulp from local suppliers. Paste producers are in turn unable to procure fresh tomatoes from farmers meeting the quality standards and in quantities that enable optimum plant utilization. As a result, most paste makers have diversified their operations, processing tomatoes during the peak seasons covering (December to April and August to October) and mango pulp or other fruits during the lean season (April to July).

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TOMATINA storage projects, investors must have a long-term horizon, which is challenging for the private sector in high-risk, developing-country environments. To overcome this situation, the Indian government has subsidized up to 50% of the cost of building cold-storage facilities (mainly for potatoes) in the Agra region.

Once they have been constructed, local private actors have taken over ownership and operations, and have managed to achieve profitability.

Thus, many paste and pulp producers in Karnataka, Maharashtra and Andhra Pradesh produce tomato paste during the two key seasons (December to April and August to October) when prices are relatively low and yields are high and operate their units to manufacture mango pulp during the period April to July, thus maintaining year-round operations.

Tomato price fluctuations can also severely impact procurement and processing. The All-India Coordinated Research Project on Postharvest Technology estimated total average postharvest losses of 13% for tomato though losses could be higher across the value chain. In Andhra Pradesh a large number of smaller tomato processing plants are reported to have suspended operations due to the unviability of processing in view of fluctuations in tomato prices and supply bottlenecks.

Despite the high differential prices, tomato processed product manufacturers depend on importing significant large quantities of tomato paste from California, China, Italy and Spain. A 30% customs duty levied on import of tomato paste, pulp and juice concentrate in 2014 has moved value-added producers to either develop their own local supply chains for paste processing or to contract supplies

from local paste makers. Cremica, the Jalandhar-based ketchup and pasta maker blends imported and locally-procured paste to achieve an optimum quality-price mix that ensures processing viability without compromising on product quality.

Tomato processing specifications are laid out in the Indian Fruit Products Order, 1955 according to which compliance requires are as follows: a) Tomato Juice (5% total solids); b) Tomato Puree (9% total solids and Sodium Benzoate 250 ppm); Tomato Ketchup (25% total solids.

Acidity: 1.0% Sodium Benzoate: 750 ppm).

Lack Of Cold-Chain Infrastructure Generates Value Losses Cold storage for Indian tomatoes could only be realistic in the very long term, and only for high-end consumers who are willing to pay a premium for fresh tomatoes. However, the case of Indian cold-chain development for potatoes, a higher-value crop with a longer shelf life, provides an interesting perspective on the complexities of post-harvest loss reduction.

At present, Indian cold-storage capacity is only around 30 million tons, while requirements are about 60 million tons.

Due to the limited profitability of cold

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Apart from availability of long-term financing, another barrier to the adoption of storage technologies is cash constraints, which farmers face at harvest time, forcing them to sell quickly. To overcome this, the Indian government first removed price-fixing regulations, allowing coldstorage owners to set prices freely. This flexibility reassured banks of profitability and freed up loans.

In the tomato industry, farmers have adapted their harvesting strategy to deal with this lack of infrastructure. They pick their tomatoes when green instead of red-ripe, so that the tomatoes can be sent on longer distances as they will take longer to ripen. Moreover, farmers have introduced new tomato varieties that are more resistant to transport bumps and handling. In the long run, the tomato supply chain could marginally benefit from the operationalization of the cold chain, mainly to serve the emerging Indian upper class.

Leading Indian Tomato Paste Makers And Product Manufacturers Nestle India: Nestle is India’s leading ketchup maker with a market share of 37% through its Maggi brand. Nestle also produces tomato soup mixes competing against Knorr and other leading brands.

Nestlé India collaborates with suppliers to source raw materials locally under its Supplier Development Program though it also uses its global supply chain to import raw material for ketchup production in India.

Hindustan Unilever: HUL’s Kissan brand is India’s second-most popular ketchup brand with a market share of 25%.

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TOMATINA tomato blend and pizza sauce.

Indira Foods: Established in 2008, Indira Foods produces tomato ketchup for the retail and institutional segments with a focus on the southern Indian market.

With capacity to process 30 tonnes/day, it has a 70% market share of sales to hotels, restaurants and airlines in Karnataka but also supplies to Global Green and Namdhari Group. The company procures tomatoes from Kolar district in Karnataka.

Cremica Group: produces tomato ketchup, puree, pasta sauce, dips and Indian gravies at its production facilities in Ludhiana (Punjab) and Noida, near Delhi. Apart from its retail products, the company supplies to food chains like McDonald’s, Barista, Café Coffee Day, Pizza Hut, Domino's and Papa John's as well as to institutional partners and private labels like Big Bazaar, Spencer's, Taj Group, ITC, Jet Airways and Air India.

HUL was one of the first processing firms to institutionalize farm-gate sourcing of tomatoes from smallholder farmers in Nasik district in 2011. Kissan partnered with smallholder farmers, a local tomato paste processor named Varun Agro and agri-input supply companies to establish a supply chain aimed at producing tomato paste locally that could be used as an input into its ketchup production process. Unilever sourced 40,000 tonnes of tomato from India in 2011, some 60% of its requirement for ketchup production. Working with growers it sought to mainstream sustainable agriculture practices including improving soil fertility, water management, and pest control.

Field Fresh Foods/Del Monte: India’s third largest processed tomato products maker, Field Fresh manufactures ketchup, pasta and pizza sauce under the Del Monte brand at its factory in Krishnagiri, District, Tamil Nadu. It has established a 120 ha R&D farm at Ladhowal, near Ludhiana where it is undertaking tomato production trials including specialized cultivars for the processing industry and

the application of mechanization for tomato cultivar on and harvesting.

Global Green: This Bangalore-based processor and exporter commenced large scale contract farming of hybrid tomatoes in 2012 to meet the growing demand for tomato paste and tomato paste based sauces in India. It has promoted the use of processing hybrid varieties from United Gene cs USA like UG-37, UG-157, UG52, amongst farmers which have high lycopene content. It established farmer groups and small cooperatives to enable production volumes for its processing needs and to improve quality compliance through a cluster-based approach. Global Green sources tomatoes over the two peak seasons annually from farmers in the Madanapalle area in Andhra Pradesh as well as from Kolar and adjoining areas of Karnataka which are processed at the facilities of Srini Food Park in Chittoor, Andhra Pradesh. Global Green processes over 20,000 tonnes of fresh tomato each year. Using paste produced at the Srini Food Park, it produces value-added tomato based products under the Tify brand including ketchup, pasta sauce, and

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Dabur India: Is a leading producer of tomato puree, tomato juice, soups and chutneys under its homemade retail brand and for the institutional market. Tomato processing operations commenced in 2011 at its processing plant in Siliguri (West Bengal) while juices are produced at its factory in Nepal.

Capricorn Food Products: Capricorn is one of India’s largest independent tomato paste makers supplying paste and puree to leading processors and private labels including Hindustan Unilever, Nestle and Field Fresh. It has processing facilities for paste making in Nashik (Maharashtra) and puree production in Koyna (Maharashtra), Krishnagiri (Tamil Nadu), Chitoor (Andhra Pradesh). In 2013, Capricorn established a plant in Nashik, Maharashtra with the capacity to produce 100 MT of tomato paste every day. During the tomato season, Capricorn’s paste making units’ process mango pulp to maintain round-the-year operations.

Nijjar Agro Foods: An Amritsarbased tomato paste manufacturer which supplies to Nestle, Del Monte and other processed food makers in the northern

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TOMATINA

in February 2016 plans to develop a new puree production and processing unit in Ranchi in Eastern India. Mother Dairy also sells frozen tomatoes in the Delhi-National Capital Region which it processes at its facility in West Delhi.

Godrej Beverages and Foods: Godrej targets the home cooking segment with its Smart Cook tomato puree range of products.

GRG Foods: Bangalore-based food Products company manufactures its Spego brand of tomato ketchup and Revathi brand of tomato-based powders and mixes for the Southern India market.

National Agriculture Co-operative Marketing Federation: NAFED operates a tomato paste and ketchup production facility in Vellore (Tamil Nadu).

ITC Group: ITC produces a range of ready-to-eat (RTE) products for the Indian and export market under its Kitchens of India brand. This includes curry pastes, sauces and chutneys which include tomato as an important ingredient.

Indian region.

GD Foods: Produces both tomato paste and processed products like ketchup under its Tops brand at its plant operations in Tarn Taran (Punjab). It currently operates plant facilities producing 42,000 tonnes per annum and supplements tomato processing with chili and apple products.

For tomatoes, it undertakes contract farming over 400 ha with farmers in Punjab.

Mother Dairy: The company produces tomato paste and its Safal brand of tomato ketchup at its 23,000 tonnes per annum pulp and concentrate unit near Bengaluru in Karnataka. Mother Dairy partnered with Bayer CropScience to

improve tomato production amongst farmers in Chickballapur and Tumkur districts of Karnataka for its processing needs. Bayer CropScience identified tomato varieties suitable for processing and scientifically raised seedlings of the shortlisted varieties.

These were then provided to some 361 farmers for further cultivation on 280 hectares under its supervision and improved crop production practices including crop protection techniques were applied as well as the internalization of traceability processes. As a result, tomato yields of farmers are reported to have increased from 35 tonnes/ha to 45 tonnes/ha. The company also announced

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Grith Laboratories: Grith is a US-based specialized condiments producer which manufactures Indian paste and powder mixes at its Bengaluru facility for food services institutional clients including hotels and restaurant chains in India and overseas.

Chordia Food Products: Chordia produces tomato ketchup, paste and mixes at its factories in Shirwal close to Pune (Maharashtra) and Chennai and Dharwad (Karnataka) for both the domestic retail market and supplies to institutional clients. With an installed capacity of 2.5 tonnes per day, it previously supplied tomato paste to Nestle but now consumes most of its processed paste.

An assessment of processing capacities and operations amongst leading tomato processors in India shows some interesting trends. Most paste processors supply to a number of value-added product makers though some ketchup and snack

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manufacturers have annual processing contracts with paste makers. Processers use between 10-20% of their annual processing capacities for tomato paste production while the remainder is used for processing other vegetables and fruit, particularly mango pulp. Andhra Pradesh remains the leading center for processors, possibly due to the availability of large volumes of fresh produce including tomatoes, mangoes and other raw material supplies. Maharashtra, Karnataka, Tamil Nadu and Punjab are other key processing centers.

Srini Food Park and Jain Foods in Andhra Pradesh, Devaraja Foods and Capricorn Foods in Tamil Nadu and Varun Foods in Maharashtra have amongst the largest production processing capacities. Key processors made significant increase in processing capacities during 201314, however utilization for processing tomatoes remains stagnant due to raw material availability and price constraints.

Current Trends New market entrants in India are seeking to develop integrated value chains to meet their processing priorities. Japanese paste maker, Kagome has acquired a majority stake in Tasty Bites, a sauce and snackmaker giving it considerable access to the India market. Kagome’s earlier

attempt to establish an Indian jointventure to produce processed tomato products appears not to be progressing.

However, the company is likely to pursue efforts to build up a base for processed tomato in India. As part of this effort, Kagome has acquired a stake in the hybrid seed company United Gene cs India (UniGen India). This company is developing a range of tomato seed products for the Indian market including a specialized range of processing tomatoes.

Figures from the World Processing Tomato Council (WPTC) indicate a likely 8% drop in production in processing tomato amongst major producers globally due to adverse climate conditions. This suggests a possible reduction in the availability of processed raw material like tomato paste as well as an upward trend in prices. This will likely also impact Indian processors who are partly or largely dependent on imported paste, pulp and juice as raw material input into their production processes.

Some major trends are clearly evident amongst large-scale tomato processors operating in India. One, an increasing emphasis on procuring and using paste and pulp sourced from domestic sources, either through a) The establishment of in-house paste

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TOMATINA

production units; b) managing the supply chain management for raw material but hiring processing facilities based on seasonal needs as pursued by Global Green; and, c) Sourcing paste from intermediaries through long-term supply contracts or spot purchases. Second, paste/ pulp producers as well as value-added product processers are more vigorously developing networks with farmer groups and clusters and incentivizing the adoption of contract farming. There is an increased recognition that value enhancement along the supply chain can make the subsequent manufacturing process both more sustainable and commercially viable. Product manufacturers indicate a willingness to source paste from wherever it is available in India. For example, producers like Cremica and FieldFresh with production facilities in north India procure paste from Krishnagiri and Chittoor tomato paste firms when required.

Mega food parks like the India Food Park in Tumkur (Karnataka), the Srini Food Park and the proposed Agripalli Food Park in Andhra Pradesh provide facilities for establishing regional processing facilities near to raw material production centers.

Food parks provide access to common facilities for pulping and processing for limited periods – preferred by firms which may require short-term processing capacities without the need to invest in new production facilities. Further, pulping tomatoes requires raw material storage facilities because pulping is seasonal and storage enables optimizing capacity utilization.

The network of collection centers, packhouses and logistic facilities enhances reaches and supply chain effciency while maintaining quality. Thus integrated food processing facilities facilitate effective backward and forward linkages, storage and reduce waste caused mainly due to inadequate facilities or improper handling. To farmers in its catchment area it provides a much-needed alternative platform to sell their produce and facilitates the prospect for success of contract farming arrangements.

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DEMONETIZATION

The Great Indian Financial Crunch Demonetization

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he Narendra Modi government shook the country by announcing the demonetisation policy and turning notes of Rs 500 and Rs 1000 into paper. While people were allowed to exchange their old notes for valid currency, deposit the money, or withdraw a certain amount from the ATM, the move saw unprecedented lines outside banks and ATMs with bank employees working overtime to make up for the cash crunch in the common man’s life.

The move to make currency illegal overnight has, however, happened earlier,

both times with a view to interrupt black money deals and tender black money hoarded as illegal. By putting a cap on the money that one is able to deposit without coming under the scanner of the Income Tax department, the government aims at investigating possible tax evasions as well.

In Parliament, the opposition parties were at loggerheads with the centre, with most demanding a rollback of the move.

However, the government vehemently stayed on that they will not be taking back the move even as lines continue to grow

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outside banks.

There was pandemonium in Rajya Sabha over the demonetisation issue. The government allowed dispensing cash of up to Rs 2000 through debit or credit cards at select petrol pumps across India.

The drive to purge black money from the economy, at a stroke, wiped out 86 per cent of the money in circulation. Delays in printing new 500 and 2,000 rupee notes meant that money could be tight for weeks to come, resulting in more chaos in the streets.

The resultant cash squeeze has meant that consumers and businesses have to

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DEMONETIZATION announcement, Ola saw an increase of 15 times in recharge volumes on its e-wallet.

Cash-on-delivery transactions, costly and time-consuming for e-commerce retailers, should drop at least temporarily.

The dissolute side of demonetization.

As the supply of money dries up, small and medium-size business are finding it difficult to pay daily wages and raw material costs, among other expenses.

(Indian small businesses typically rely heavily on cash for their day-to-day operations.) While the government twisted certain rules and increased withdrawal and deposit caps, it should still be a tough few weeks.

hold back on expenses, be it salaries or purchase of raw materials. a host of businesses - from transporters to clothing manufacturers, are being forced to restrict operations to deal with the cash crunch.

This current scenario could lead to a demand shock and a decline in growth rates for the economy. Prime Minister Narendra Modi’s massive demonetization exercise has snowballed into an unprecedented financial emergency in Asia’s third-largest economy.

On Nov. 08, Modi announced that all notes in denominations of Rs500 and Rs1, 000 would be illegal in the country.

These were the highest and most popular currency denominations in India, forming 86% of the currency in circulation by value. Indians have until Dec. 30 to deposit all the notes in banks and post offices to get them replaced.

Modi’s decision was to tackle the corruption, black money, and fake currency that often finance terror. But Indians are panicking. There are long queues outside banks and ATMs, and the poor, unbanked section of the population is not really sure what it should do with these notes.

The authentic side of demonetisation While consumers could be cash-strapped for the next few weeks, which could hit

spending, the move is a boost to India’s image and economic prospects in the long term. For one, Modi’s masterstroke would mean more people disclose their real incomes and pay taxes, which is good for the government’s coffers. (Only about 1% of the country’s population pays income tax currently). Brokerages have estimated that the crackdown on unaccounted cash could bring in as much as $45 billion for the government. This unprecedented stash of cash could help Modi spend more on education, health, and housing.

India’s banking sector, which is fighting toxic loans and liquidity problems, should also bring in benefits. Some Rs1.5 lakh crore ($22 billion) in deposits have been collected by banks since the demonetization announcement. Banks can use these funds to address their liquidity requirements. Meanwhile, those with no bank accounts would now be forced to open one in order to deposit the now-illegal notes, in turn helping Modi’s Jan DhanYojana(people’s wealth program), India’s internet startups are cashing in on the opportunity, too. For instance, ridehailing startup Ola—Uber’s competitor in India—and Paytm, a mobile wallet firm, have seen a surge in new registrations as people move from cash to digital payments. Within 15 hours of Modi’s

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Some critics say not enough measures were taken to handle the deposits and withdrawals that were expected following the announcement. Others question the timing of the move and allege political motivations, particularly with key states preparing for elections. It is important for the ruling Bharatiya Janata Party (BJP) to win them if it is to continue to show its strength in the country.

Some Indians have devised workarounds to use up the banned notes. Certain government services such as the railways still accept these notes. So those with the now-invalid notes book expensive train tickets, cancel them, and get refunded in new notes. So the Indian Railways had to stop refunding in cash.

Weddings are getting postponed as bills to wedding halls, florists, and caterers are typically paid in cash across India.

Now, the govt has taken certain steps, like allowing people to swipe Rs 2000 from govt petrol pump, also the houses where wedding are taking place are allowed to withdraw 2.4 lakh, but unfortunately the exchange has gone down to Rs 2000 again from Rs 4000.

The disagreeable side of demonetization For some, the long queues turned fatal.

There have been suicides reported, too. In the state of West Bengal, a man allegedly murdered his wife after she returned home from the ATM with no money;

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DEMONETIZATION expected to impact small merchants’ way more than big retailers, who cannot offer choice and convenience of digital payments to consumers.

Non-Corporate Small Business Sector (NCSBS) forms the economic foundation of India. It is also counted among the largest dis-aggregated business ecosystems in the world, which sustains upwards of 50 crore lives. The biggest threat to the NCSBS comes from online/e-commerce players along with large corporate/organised players who offer choice and convenience of digital payments. But, now it is about time that both small business owners/merchants and consumers to see underlying benefits of transacting digitally.

reports indicated that he expected her to wait in the queue longer.

There have been reports of doctors denying treatment because patients had only Rs500 and Rs1, 000 notes on them.

Some hospitals have refused to admit even critically ill patients. In Patna, Bihar, the family of a three-year-old rape victim reportedly had trouble getting an ambulance driver to take her to the hospital as he allegedly refused to accept the banned currency.

Also Supreme Court has questioned the Indian government's move for the second time this week. The apex court has warned that the country "will have riots on the streets" and that the problem is very serious.

Offline retailers play the digital card to counter drop in sales With consumers saving every single penny post the Government’s recent decision to demonetize Rs 500 and Rs 1,000 notes, offline retailers are extending and encouraging consumers to use digital payment alternatives, in order to counter the short-term loss in consumption emerging from lack of enough liquidity in the economy.

Consider the fact that India is among the most cash-intensive economies in the world, with a cash-to-GDP ratio of 12

per cent. That is almost four times that of countries like Brazil, Mexico and South Africa. The recent decision has led to retail shops and malls wearing a deserted look, albeit even for a short period of time.

As per analysts, sectors with a sizeable magnitude of cash transactions – such as real estate, construction, jewellery, highend retail and travel and tourism – are expected to be adversely affected. White goods demand, a source of strength for the economy, is also expected to take a hit.

To stay afloat and conquer the challenges demonetization has posed, offline retailers are encouraging consumers to move away from cash and are giving various payments solutions alternatives to avoid purchase hindrances.

Future Group, which operates Big Bazaar, the largest retail chain in the country, is encouraging consumers to use cards. In their urban stores, around 40 per cent sales happen through cards.

In smaller towns and cities, that number is around 25 per cent. So the top retailer is planning to introduce cheque payments and encourage people to go digital.

Alongside, promoting debit card, digital payment and gift cards.

The old currency ban, however, is

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The traders’ body, however, expects the Government to come up with suitable incentives for the small traders. They requested the Government to setup a committee – including representation from CAIT – on strategies of implementation in line with the recent directive. It is critical that they (Government) consider suitable incentives and rebates for small merchants to adopt digital payments as done in the case of countries like South Korea and Uruguay.

US retailer Walmart, which operates cash-and-carry business in India, agrees that the sales to kirana stores will take a dig. Walmart disclosed that in their Cash & Carry business majority of members are small traders, who largely receive and pay cash for their transactions. They do not accept credit cards nor do they pay by credit cards. Just like other retailers, Walmart is also giving options in form of payment solutions to its members, including debit/credit card, cheque, net banking and digital wallet.

Demonetisation hit agriculture, informal workers worst In contrast, sectors like e-commerce and payment banks, payment gateways are set to gain as transactions using cashless methods will increase over the coming months. There will huge impact on retail sector like kirana shops, vegetable and fruit vendors and long-term negative

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DEMONETIZATION (78 per cent of the population), do not have an Internet connection.

The demonetisation-led slowdown may also impact a key economic driver, private consumption, and the things that people buy. Private consumption, as a percentage of gross domestic products (GDP) has been steadily rising over five years to 2015-16, according to data from the office of government’s economic advisor.

impacts on the real-estate.

Overall, a negative impact on disposable income is expected along with disruption in the consumption patterns of the general populace.

Demonetisation penalised the entire informal sector and damaged it permanently, especially the informal financial sector, which could account for a fourth of bank lending, or 26 per cent of GDP.There is no doubt whatsoever that Mr Modi has pulled off a major political and publicity coup and substantially enhanced his reputation as a muscular leader, but surely somebody needs to ask: at what price?.

A total of Rs 14 lakh crore — or $217 billion, 86 per cent of the value of Indian currency then in circulation — became useless from midnight of November 8, part of the government’s crackdown on black money, which accounts for about a fifth of the economy.

Agricultural growth in India contracted 0.2 per cent in 2014-15 and grew no more than 1.2 per cent in 2015-16, largely because of back-to-back droughts.

Agriculture was expected to grow at 4 per cent this year, according to a CRISIL report, but demonetisation is likely to

dent that forecast. India is currently in the midst of the winter sowing season, but farmers are reported to be running out of cash to buy seeds.

Indian farmers expect a record harvest this year, but the rural economy on which 800 million people, or 65 per cent of India’s population, depend is largely driven by cash. Farmers buy seeds, fertilizers and farm equipment in cash, pay their workers in cash, and traders and commission agents pay farmers in cash.

The shortage of cash is spreading anger in the countryside.

The informal economy which presently employs more than 80 per cent of India’s workforce includes workers in small and medium industries, grocers, barbers, maids and others. They have limited access to Internet, online payments and are affected as roadside vendors, cab drivers, kirana stores and medical stores have stopped accepting Rs 500 and Rs 1,000 notes.

People, who do not use debit or credit cards, have no access to the Internet or mobile banking and e-wallets will be the worst hit, said the Deloitte report.

India has about 700 million debit and 25 million credit cards, according to Reserve Bank of India; about 950 million people

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As e-commerce websites stop cash-ondelivery the most favoured option for Indian online shoppers, comprising 80 per cent of sales and struggle to hand over to banks the money they collected after demonetisation, the report predicted a rebound that will benefit both the e-commerce industry and companies facilitating payments to it, such as payment gateway companies, payments banks and electronic money transfer portals. Online transactions in India rose 40 per cent in 2015.

Other possible impacts would be a hit on foreign trade as the rupee currency appreciates; lower inflation and cheaper prices, especially in the real-estate sector. As far as the real economy is concerned, there is going to be huge blow to purchasing power. All kinds of people who were accepting notes are going to refuse to accept the notes.

Domestically, there could be some turmoil as the effect will be disproportionately felt by the lower and upper income classes.

Dairy industry favor demonetization Dairy milk cooperatives across several big states are happy about the demonetisation-led boost to banking transactions and many like Amul, Karnataka Milk Federation and Mother Dairy expect to overcome resistance from farmers while transferring money to their bank accounts.

Dairy companies usually pay farmers from whom they source the milk once a week through cash payments.

Karnataka Milk federation, which daily

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DEMONETIZATION

procures 70 lakh litres milk from 9 lakh farmers across 14,000 societies will start making the weekly payments via bank accounts, and also federation now plans to now start disbursing payments to farmers which it does once in two or three week through bank accounts. It pays out about Rs 18-20 crore daily to milk-supplying farmers.

Hatsun Agro, a leading private dairy player form Chennai which procures 28 lakh litres milk daily and disburses Rs 73 crore every ten days to farmers has been making 99.65 % of it payments through banks accounts for the past one and a half years. Initially there was resistance from farmers but Hatsun Agro wanted to get them away from the clutches of money lenders.

Gujarat Cooperative Milk Marketing Federation (GCMMF) that owns the country’s top dairy brand Amul had 18000 societies that were disbursing about Rs 450 crore per week i.e. Rs 2-3 lakh per society in cash to milk producers.

Though the cooperative had tried to make payments through banks but due to vested interest of society secretaries, they didn't allow it to succeed. There are few problems but the top notches at Amul believe that things will settle.

Mother Dairy which currently procures 35 lakh litres milk daily and pays Rs 80-90 crore a week to farmers, says that it makes direct cash transfers to its five farmers procurer company who are facilitating farmers to open accounts.A lot of success can be seen in Rajasthan and some parts of Gujarat, where farmers are getting direct cash transfer. This is the way forward and in Mother Dairy’s new Greenfield projects in Nagpur, Marathwada and Vidarbha, digitization is being implemented.

The daily milk collection in Maharashtra, approximately worth Rs 44 crore, is also slowly shifting to bank payment. The head of the village level milk collection centre used to withdraw cash from bank and make cash payment to farmers twice or thrice a month. Now they are transferring money directly to farmer’s accounts as limit on individual withdrawals from the

bank has come to place.

Demonetization, mobile wallets and Digital India Until now, digital disconnect has been a major challenge in India, as many have preferred transacting in cash instead of making use of bank transactions and plastic money. With demonetization in effect, several digital payment solution providers have created innovative ways to attract new customers. The result has been mobile wallets like Paytmwitnessing 200 per cent increase in app download numbers, and Ola Money seeing a 1,500 percent increase in wallet recharges.

These digital wallets not only help in paying electricity, DTH, and transport bills, but they also enable payments at nearby mom-and-pop stores that are already registered for these services.

The vision of connecting Indians through digital media has been further encouraged by this move on the part of the government.

The m-wallet (mobile wallet) segment broadly consists of services related to banking transactions, transfer of money as well as value-added services like bill payments, shopping, ticketing, etc. Of these services, m-wallets are primarily used for the transferring money, followed by the payment of bills.

MobiKwik also saw its app downloads

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quadruple and a 20x increase in money added to the wallets MobiKwik. Prepaid cash cards are another option that customers found useful and that meant good news for companies like ItzCash whose card is now coming in as a huge rescue instrument for the public at large, so much so that more than 30-40% growth in the volumes traded has been witnessed.

Other alternatives include mobile payments systems linked to e-commerce businesses like Ola Money, FreeCharge, Flipkart Wallet. Ola Money, the payment portal for Uber’s archrival in India and popular transportation app Ola Cabs, reported a 1500% jump in money added to the accounts in less than 4 hours.

To sweeten the deal further, these companies are going all out by providing tempting offers. For example, FreeCharge is advertising a variety of cash variety of cash back schemes for using the service, Paytm is offering Rs. 1000 cash back on flight bookings and a flat fee of 1% on all transactions.

Impact of Demonetization Demonetization has resulted in great inconvenience to the public seeking to exchange their defunct currency note for fresh cash. They have to stand in long queues for long hours day after day. The problem doesn’t disappear in one day. Weeks have passed since

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DEMONETIZATION highly risky and disruptive, and it depends on how the government and RBI manage the situation from here. The most critical challenge for the government will be to ensure that the working capital of small businesses is replenished by the banking system.

About 30% of the working capital of small and medium businesses comes from the black segment of the economy. When you pull out money of this magnitude you will have to replenish it with fresh credit and this could mean banks delivering anything between Rs 4 to 5 lakh crore of fresh working capital to micro, small and medium businesses so that their production cycles are resumed. These sectors contribute to 40% of India’s GDP and over 75% of employment.

demonetization was announced and still the long queues before commercial bank offices and ATMs continue. The public is inconvenienced because they don’t have the cash with which to buy daily necessities. Households where some members are admitted in hospitals have to face great inconvenience because they are unable to pay hospital bills and make payment for medicines required. Families where a ceremony like marriage is due have immense difficulty as many of them find it difficult to pay their bills online.

The people in rural areas and the farmers are also facing a great deal of hardship.

Many of them do not have bank accounts or own a debit/credit card. The concept of internet banking is far removed for them.

These people may be induced to rise in revolt. Already the case of looting of a fair price shop by the public in Madhya Pradesh has been reported. It goes to the credit of the peace loving nature of the Indian public that major incidence of social unrest have not been reported so far.

If the demonetization measure introduced by the government has to be successful it should result in immobilization of a large amount of black economy. The large volume of cash deposited by the public during the last few days in banks is actually white money. They can only

have an inflationary impact by increasing money supply. The real success for the government will come when people fail to deposit their holdings of black money in banks. The extent to which this happens will determine the success of the scheme.

The demonetization scheme is meant to deal with black money maintained in the form of cash. In addition to cash a great deal of black money is converted into gold and jewellery, real estate including land, share holdings and so on. The present demonetization scheme does not have an impact on black money held in those forms which do not constitute cash holdings. It will clean up the system only to the extent black money is held in the form of cash.

The demonetization scheme introduced by the government is a well-intentioned one. But poor implementation and poor planning has caused a great deal of inconvenience to the public. There is also no guarantee that the problem of black money will go away forever. It is possible that after a passage of time the people will revert to their old bad habits and the black money problem will reappear in society.

Moreover the present scheme only covers the cash component. To the extent that other forms of black money holdings are more important its contribution to cleaning up of the system is limited.

This scale of currency replacement is

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The informal and formal economies don’t exist in separate silos and are joined together in a common value chain. The Indian economy is like a big whale which has large black and white patches over its body. But it is one integrated organism. It is this complexity that the policy makers in the government will have to internalize, before coming up with follow-up policy measures. The follow-up policy measures are very critical without which demonetisation alone will not work..

After the painful currency replacement, which some say could last three months, what we will have is an economy whose growth rate would have shrunk to near zero. It will be like a patient in critical condition. The government may have the bonanza of Rs 2.5 to Rs.3 lakh crores as currency which gets extinguished as the owners do not come forward to replace it. This will show up as increased net worth or reserves of the RBI. The RBI may lend part of this to the government, without impacting inflation, for enhanced spending on physical and social infrastructure. These are possibilities in the longer time frame.

There is no doubt that the economy, especially the informal sector and agriculture, will have to recover from a deep shock.

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NEWS

Food ministry favours slashing import duty on wheat

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year also, private flour millers purchased about 5 lakh tonnes of wheat from Australia.

he Food Ministry's proposal for a modest drop in duty is now being considered by the government even as private flour millers have been demanding total withdrawal of import duty.

Food Ministry has strongly flavoured the slashing of duty on wheat imports to at least 15 per cent from the existing 25 per cent in order to boost domestic availability of the food grain. This move to bring about modest decline in import duty on wheat will be a precautionary step.

The Food Ministry is concerned about lower wheat purchase by state-run Food Corporation of India (FCI) this year despite projection of higher output by the Agriculture Ministry.

Wheat stocks with FCI are declining as

The state-owned FCI at present has a wheat stock of 24.2 million tonnes. Last year's procurement of wheat was at about 31 million tonnes. This year there is a marginal decline to 25.6 million tonnes due to low arrival. private flour millers are buying grains from the corporation "apprehending shortages in the market". For its part, the corporation is keen to maintain a buffer stock for the Public Distribution System and other welfare schemes.

Traders have started looking at the import route to procure the commodity. Last

The domestic production has suffered this year due to drought and a long dry spell in several parts of the country.

The Agriculture Ministry has maintained that due to good monsoon in 2016, after two years of drought, the country can expect record foodgrain output, including for wheat, during the 2016-17 crop year.

Bio-diversity conservation laws should not hamper agriculture: P.M

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aws on conservation of agrobiodiversity should not hamper growth of agriculture in developing nations like India, Prime Minister Narendra Modi said, while asserting that use of technologies for crop enhancement must not be at the cost of sustainable development. Addressing the first ever International Agro-biodiversity Congress in the national capital, Modi cautioned against growing threat to plant and animal species and said there is a need to adopt a “shared vision” for conserving them through focused research and proper management of genetic resources.

“Every country needs to learn from other countries. Nature was entwined with the society and its rituals in India by our ancestors and it has kept the nature sustained and survived,” he said. He said

this platform will initiate and encourage a dialogue among the relevant stakeholders including farmers to better understand everyone’s role in agro-biodiversity management and the conservation of genetic resources.

“India is the perfect venue for the firstever International Agrobiodiversity Congress, as it is one of the most diverse countries in the world.

It takes up only 2.4 per cent of the world’s land area, and yet it harbours 7 to 8 per cent of all recorded species, including over 45,000 species of plants and 91,000 species of animals,” Prime Minister Modi said.

The Prime Minister said technology plays an important role in the development of

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agriculture but added that there is a need to monitor the drawbacks of excessive use of technology as well.

“We need to be alert and monitor the technological impact in agriculture. In an agricultural ecosystem, Fertilizer is a cause for concern.

Since the excess usage exterminates not only the organisms which harm agriculture, but those species which play an important role in preserving the ecosystem,” he said.

The Prime Minister said that global warming and pollution have adversely affected different variety of plants and wild life who are facing extinction, adding the world needs to come together to save the species.

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NEWS

Pulses traders appreciated the Subramanian committee’s report

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he committee headed by Chief Economic Adviser Arvind Subramanian recommended immediate increase in the minimum support price (MSP) by at least 20% for majorpulses with tur and urad at Rs 60 a kg from Rs 50.50 a kg each and chana at Rs 40 a kg from the existing Rs 35 a kg.

Pulses traders have appreciated the Subramanian committee’s recommendations on measures needed for long term solutions to the commodity’s inflationary problems.

Pulses traders say that this is the first time ever that the government has received right policy recommendations.

Some years ago, when pulses’ export was banned, India used to be a hub for processing of varieties of dals. But when dal prices moved up, then Food Minister Sharad Pawar invoked the ban.

“Wheat output stands at four times that of pulses. This means, if a farmer harvests four tonnes of wheat on a piece of land, he would get only one tonne of pulses.

Therefore, MSP for pulses (tur and urad) should be four times that of wheat which currently works out to around three times.

Assuming that even 10 per cent farmers are diverting there crop from wheat to pulses, India would have enough pulses,”

said Pradeep Jindal, President, Pulses and Beans Importers Association.

India’s pulses consumption is estimated at around 24 million tonnes as against its production at 16.47 million tonnes in 2015-16 and 17.15 million tonnes in 201415 because of two years of subsequent droughts.

Following a more than 30% increase in acreage on favourable monsoon, India’s pulses output is estimated to breach its previous record of 19.25 million tonnes in 2013-14 to achieve at 22 million tonnes for crop year 201617.

Further, the panel recommended that the Centre should encourage states to delist pulses from Agriculture Produce Markets Committee (APMC) Act to allow farmers to sell their produce to consumers directly.

The government has already adopted this practice in fruits and vegetables.

“The role of APMC is nothing beyond collecting 5.8 per cent of various taxes just to make pulses costlier,” said S P Goenka, Director, U Goenka Sons, a Mumbai-based pulses importer. “Today, farmers should be allowed to sell their produce to anyone who pay higher prices.

If they feel, they can sell their output directly to consumers at the prevailing market price.

The system which was set years ago as a vote bank for politicians, still continues.

Today, APMC has become irrelevant. So, it should be abolished.”

“The ban on pulses exports was just an eye wash. India used to import 3 million

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tonnes of pulses about a decade ago of which 10 per cent was processed locally for re-export which used to earn forex for India. Now, export of 10 per cent of imported goods makes no difference in its availability for domestic market as dal mills could have imported this exportable quantity extra.

The ban on export not only killed our industry but also helped emerged many such processing units in the Middle East and Asian countries. It should be immediately revoked to make a market free from any hurdles,” said a senior industry official.

Similarly, traders termed as wrong the stock limit imposed by the current NDA government to control pulses inflation, and have urged the government to intensify procurement to meet its buffer requirement and purchase more in case of distress sale from farmers.

“By imposing a stock limit, the government restricted stockists to hold limited quantity which means supply is restricted. Instead of taking all corrective measures, why the government has not convened a meeting of farmers to understand the problems faced by them for growing less pulses. The increase in pulses area this year is the result of high prices during the last two years. The government, therefore, needs to take a long term measures to encourage farmers with adequate returns to their produce,” said Jindal.

Apart from urging the government to allow genetically modified seeds in pulses for higher yield, traders called for immediate ban on futures trading due to excessive speculation by certain groups of traders.

“If all these measures adopted now, India will be self-reliant in pulses in the next five years,” said Goenka.

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Himachal growers celebrate 100 years of growing apples

A

pple growers in Himachal Pradesh this month celebrated a hundred years of fruitful efforts of cultivating delicious and luscious varieties of the fruit in the state, while the state government did not mark the centenary.

The fruit’s cultivation in Himachal Pradesh, with more than 90 per cent of the produce going to the domestic market, has brought prosperity to the cultivators over the past half century, say experts.

‘The apple growers of Kotgarh and its nearby areas celebrated 100 successful years of apple cultivation at a function,’ Cultivator and Gram Panchayat head Amar Singh Nalwa told.He said the first apple orchard in the state was planted in Kotgarh in Thanedar panchayat, some 85 km from Shimla, on this day in 1916 and that had helped Kotgarh to progress economically, socially and also marked its presence on the global map.

Nalwa, the brain behind the function, said it was organised at the initiative of the local growers and there was no celebration from the government.

State’s apple boom is credited to Samuel Evans Stokes (later named Satyanand Stokes), an American missionary who first introduced the high-quality apples in

the mid-altitude hills.

From a small orchard in Kotgarh, Stokes promoted the apple cultivation in other areas too, especially in upper Shimla that currently alone accounts for 80 per cent of state’s total apple production.

Since then the hill state has been synonymous with apples that alone constitute 89 per cent of the state’s fruit economy of Rs 3,500 crore ($520 million).

She attended the function, which also saw a photo exhibition on Satyanand Stokes’ life as a local apple cultivator.

Apple grower Vinod Chauhan of Banot village in the Kotgarh area said Satyanand Stokes, who came to India as a missionary in 1905 during the Kangra earthquake, later decided to settle in Kotgarh.

He had purchased a huge chunk of land where he planted apple rootstocks brought from the US. Before opting for apple cultivation, the locals were planting mainly wheat, maize and pulses.

‘Initially the locals were doubtful about the success of apple cultivation in the area. Seeing the success in the orchard of Stokes, some of the locals opted its

cultivation in the early 1930s,’ said Chauhan, whose fifth generation is also settled in Kotgarh.

By 1960s, he said, the entire region bloomed with apple cultivation and that mainly brought unprecedented prosperity.

Currently, the Kotgarh-Thanedar area is among those with the highest per capita income in Southeast Asia. The locals have diversified the apple crop by growing cherries, apricots, almonds and nectarines.

Besides Shimla, most of the apple cultivation is concentrated in the districts of Kullu, Mandi, Lahaul and Spiti, Kinnaur and Chamba.

Surveys of the state horticulture department show the productivity of apple ranges from 6 to 11.5 tonnes per hectare in the state, in comparison to 35 to 40 tonnes per hectare in more advanced countries.

The area under apple cultivation in Himachal Pradesh has increased from 3,025 hectares in 1960-61 to 109,553 hectares in 2014-15, which constitutes more than 49 per cent of the total area under fruit cultivation.

Government to extend export duty benefits to onion

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o halt sudden fall in onion prices and protect farmers’ interest, government has decided to extend export duty benefits to onion for promoting its outbound shipments. The duty benefits for export of both fresh and stored onions would be available till December 31. The Ministry of Commerce will provide 5 per cent MEIS (Merchandise Exports from India Scheme) for encouraging export of fresh/chilled onions.

Under the Merchandise Exports from India Scheme (MEIS), the government

provides duty benefits at 2 per cent, 3 per cent and 5 per cent depending upon the product and country.

Wholesale prices at the Asia's biggest onion market at Lasalgaon in Maharashtra have crashed to Rs 6 per kg compared to Rs 48.50 per kg in the year-ago period, official data showed. Onion prices have crashed due to estimated higher production at 202 lakh tonnes in 2015-16 crop year (July-June) as against 189 lakh tonnes in 2014-15 crop year.

Farmers in Maharashtra and Madhya

VOl.12 Issue 01 November 2016

Pradesh, which are among leading onionproducing states, have taken to distress sale of the bulb due to higher supply and unsold stock. The situation has worsened to an extent that farmers in Nasik district have claimed that they got 5 paise per kg rate for their produce.

It may be noted that onion exports went up 33 per cent to Rs 2,362 crore in the first 11 months of 2015-16 on higher realisation of sales. India exported 10, 86,072 tonnes of onion for Rs 2,010 crore in 2014-15.

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India may soon export non- basmati rice to China

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ndia may soon get permission from China for the export of non- basmati rice acceding to a long-pending request from New Delhi.

pesticides) firm UPL found that the allegations regarding the presence of Khapra beetle in processed Indian rice were wrong and vastly exaggerated.

Chinese officials will visit India to inspect 19 rice mills registered with the National Plant Protection Organization (NPPO). These mills are situated in states including Punjab, Haryana, Uttar Pradesh and Madhya Pradesh.

The Centre had repeatedly taken up the issue of the country’s ballooning goods trade deficit with China bilaterally.

India had demanded market access for products including non-basmati rice, pharmaceuticals and several fruits & vegetables among others.

“The inspection is a very significant stage in the process,” A. K. Gupta, Director (Basmati Export Development Foundation, foreign trade, World Trade Organisation-related matters & agri-export zones), APEDA, said.

He expressed hope that following the inspection, China will soon issue a formal notification regarding permission for nonbasmati rice exports from India.

Meanwhile, Rajen Sundaresan, Executive Director, All India Rice Exporters Association (AIREA), said he was also hopeful that the Chinese authorities will shortly give green signal for non-basmati rice exports from India to China. He said a recent joint survey done by AIREA and the leading agro-chemical (including

India’s goods trade deficit with China has surged from $1.1 billion in 2003-04 to $52.7 billion in 2015-16. Beijing has been “denying” market access to India's non-basmati rice claiming that the item had failed to meet Chinese norms on quality, health and safety. Its concerns included the likelihood of a pest called ‘Khapra beetle (or cabinet beetle)’ getting transported along with Indian nonbasmati rice consignments to China.

China was the world’s largest rice importer in 2015-16 followed by Saudi Arabia and Iraq.

To export to countries including China, it is mandatory for Indian rice exporters to be registered with the NPPO — the Indian

government body in charge for inspecting these mills and granting certificates on plant health for export purposes.

The NPPO assisted its Chinese counterpart AQSIQ during the inspection from September 19-28 for pest risk analysis and plant quarantine purposes to ensure that the non-basmati consignments from India pest-free, safe and of good quality.

Agricultural & Processed Food Products Export Development Authority (APEDA) under the Indian commerce ministry is also involved in the process. India had earlier sent the information sought by AQSIQ regarding the quality protocol and standard operating procedures, the sources said.

The Chinese authorities had carried out a similar inspection in 2009, following which in 2011-12, they gave their nod to basmati exports from India to China, Gupta added.

Pointing out that the 19 mills are involved in processing non-basmati and basmati rice, he said, therefore, the inspection will cover both varieties.

Fruit pulp export to UK, USA and Canada from Dec 2017

T

he Agriculture Produce Market Committee (APMC) it has entered into contracts with a few international firms for export of mango, tomato, guava and papaya pulp to these countries for which a Rs21 crore plant is being set up on Surat Kadodara Road.

APMC, Surat would be processing 60 metric tonne of fruit pulp daily for export to the United Kingdom, the United States of America and Canada from December 2017.

The plant would be set up on the premises

of APMC, Surat. During the off season when fresh mango fruit is not available, tomato, papaya and guava pulp would be processed in the plant whose foundation stone would be laid by chief minister Anandiben Patel on August 4.

The APMC, Surat has acquired licence to export from Agricultural and Processed Food Products Development Authority (APEDA) and entered into contracts with 10 international exporters who do business in the USA, the UK and Canada

VOl.12 Issue 01 November 2016

to lift the processed fruit pulp from Surat on a daily basis for international market.

This project would change the agroeconomy of the region. Canning of pulp and processed fruit pulp were for local market until now, which is set to change with this 60 MT plant.

International firms like VB & Sons, England; TRS Wholesale Co. UK; Deep Food INK, USA; Indian Groceries and Spices INC, Canada have committed to source fruit pulp from the plant.

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58 www.agronfoodprocessing.com

I

Andhra Farmers focusing on good return plantations

n Andhra Pradesh, horticultural experts are urging farmers in the district to shift from growing coconut, mango and cashew to horticultural crops.

K Sailaja, Joint Director of horticulture,

said recently, the district administration appointed 71 horticultural experts to visit fields and encourage farmers to grow

crops such as drumsticks and curry leaves.

K Raghava, a horticulture officer from Narsipatnam, said, "Curry leaf can be planted as a mixed plantation crop in mango plantations." He further said farmers could make at least Rs 200,000 per acre per annum on an average. In the market, each kilo of curry leaf is now sold at Rs 50.

plantations would do well in dry lands.

Meanwhile, K Sailaja said drumstick plantations do well in conditions where there is adequate water. There is much demand for both the sticks as well as the leaf and the root of the plant. She said drumstick trees are noted to have medicinal value, due to which they are much in demand.

However, curry leaves cannot be easily marketed and much of the market is controlled by middlemen and commission agents, who ensure that the farmer's price is reduced. He further added that curry leaf plantations require a lot of labour input for plucking and safeguarding the crop. On the other hand, he said these

The horticulture department is taking a closer look at market dynamics and focusing on plantations that can be easily exploited and provide good returns to the farming community. They are also studying the change in the urban-rural dynamics to help farmers break away from the traditional mindset.

77 Green always ensure quality production: Bhavesh

I

ndia is globally famous and widely recognized for its traditional food and spices. We manufacture and export Ground Spices, Blended Spices, Instant Food Mixes, Hing, Papad & Kasuri Methi under the brand of 77Green for the last 8 years.

As a Global spices manufacturer, our range of Spices is widely appreciated across the world for quality, high nutritional value, and excellent medicinal properties.

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The company have the capability to offer these Vegetarian spices with green concept and customized packaging in order to retain their freshness and aroma. We make sure that our Spices are in compliance with the latest industry standards.

Company is ISO & HACCP certified and operate under the license of ISO 22000, AGMARK, FSSAI (Food Standards & Safety Authority of India), Spices Board of India.

Our company is well recognized as a Pure spices manufacturer and exporter

Calendar-2016

November 2016 1st-3rd Foodtech Denmark 2nd-4th Worldfood Kazakastan 2nd-6th Indagra Food Romania 2nd-5th Eurasia Packaging Turkey 9th-12th Interfood & Drink Bulgaria 14th-17th Emballage France 19th–22nd Agro Tech,chandigarh

Events

23rd-24th Packaging Innovations Netherlands 25th-26th Empack Belgium 27th-30th Intervitis Germany December 2016 15th–17th Drink Technology , Mumbai 30TH-1st palmex Latin America Columbia

VOl.12 Issue 01 November 2016

and successfully supplying its products in 12 states of India, Indonesia, Australia, South African Countries & Middle East countries since 2009.

With expanding markets and foray into new product categories, the company plans to strengthen the team of professionals.

Company also welcome the superstokist & distributors to associate with the family of 77Green from each & every corner of the nation.

They will be awarded with attractive commission margins, lucrative packing, and consistant quality with wide range of products.

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