Oil & Food Journal April 2015 by Advance Info Media & Events

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The Food Corporation of India sees a fall of 10% in Wheat procurement

Farm-level Solar Power generation scheme” for farmers in Punjab Parag Milk Foods is planning to expand its brand to Delhi and Bengaluru To develop 72 Dairy Units in Nawanshahr Rs 3.8 cr loans sanctioned

NZ’s Fonterra buys stake in China’s Beingmate for $553mn

Mother Dairy to sell lassi via vending machines Amul reports slowest growth in 8 years

CONTENTS

FOOD OF THE GODS CHOCOLATE INDUSTRY OF INDIA 20

Sagmeister & Walsh

Rebrand One Of

Product spection: tegration is the ideal

India's Most Popular Drinks

Bold entrepreneurs

redefine snacks, now Meat Snacks

Global Dairy Processing Equipment Market 2015-2019

Five star chicken will spend Rs 3,100cr in expansion

17 Mega Food Parks to be set up by govt next week

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Beyond Milk

Value Added Dairy Products to boost up profits

SUPPLY CHAIN INNOVATIONS IN FOOD AND BEVERAGE INDUSTRY

40 Food processing, Agriculture, & “Make in India campaign”A critical analysis

Nestle delving into solutions for autism via nutrition

Processed dairy products will have bigger growth than processed milk

2015

fluid milk projection Vol.10 Issue 06 APRIL 2015

Dairy industry is one of the fastest rowing segments in India Vivek Nirmal

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Vol 10 Issue 6 April 2015

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

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EDITORIAL

Dear readers, Editorials are basically summarized form of write upgiving the editor’s views regarding an issue. So this month I decided to use this power today to analyze the politics going between the government and opposition, the food park politics and land acquisition bill ( most talked about subject at the moment). Here goes the scrutiny …… After sanctioning 17 mega Food Park across India, which was quite a great decision, the NDA government cancelled the mega food park project in Amethi - a mega dream project of congress vice president Rahul Gandhi to see his Lok Sabha constituency Amethi emerge as a major food processing hub in the area. Did the govt. actually cancel the park only because the technical flaw or was there some other reason to it….keep on pondering! The Rs 200-crore project was inaugurated in October 2013 by Gandhi, Aditya Birla Group chairman Kumar Mangalam Birla and former Union minister for food processing industries, Charan Das Mahant. It was the first such project in Uttar Pradesh which was to be set up by Aditya Birla Nuvo Limited in Jagdishpur, Amethi. The central government has now cancelled the food park project in Amethi which aimed at providing employment to some 40 thousand people. In fact the project would have helped the farmers of not only Amethi but also of the entire state. The Gandhi lobby says that the Central government accusation that the project was not viable or had technical flaws are wrong as all the norms and formalities had been completed before its foundation was laid in October 2013. Congress has now, in return, launched a scathing attack on the Narendra Modi's government, calling the Land Acquisition Bill a ploy to take away the land of the farmers and offer it to the rich industrialists. Congress Vice President Rahul Gandhi said at a farmer's rally he was addressing at Ramlila Maidan in the capital, "Modiji won the election with loans from big industrialists for marketing. He will pay back that loan now by giving your land to those industrialists. Not only the opposition but even the farmer's associations seem to be against the bill and the changes suggested in it by the Modi government. The farmer's associations like Bharatiya Kishan Union, Gram Sewa Samiti, Delhi Grameen Samaj and Chogama Vikas Avam, have been united in filing the petition against the promulgation of the land acquisition ordinance. They allege that the re-promulgated land ordinance is unconstitutional and is beyond one's legal authority of the Constitution and alleged that it is a "colorful exercise of power" by the executive appropriate law-making powers of the legislature. However, the ruling NDA government remains adamant that the amendments stated in the bill will bring relief to the farmers. PM Modi has said repeatedly on the floor of the House that he wanted a fair and transparent debate on the issue, so that any differences can be resolved and a solution can be reached amicably. Union Minister for Food Processing Industry Harsimrat Kaur in turn termed the farmers rally of Congress on the Land Acquisition Bill 'a flop show' and mere drama. Badal said Congress was misleading farmers of the country. "The Land Acquisition Bill is farmer friendly bill that safeguards the interest of farmers. Sadly enough the Congress leader Mr Rahul Gandhi, who is back after two months vacationing, has run out of issues and hence is heading this issueless campaign", she said The Union Minister said Punjab has best Land Acquisition Policy under which farmers are paid 30 to 40 per cent more than the current market price. This is the prime reason behind land acquisition going smoothly in the state for the past 10 years and centre should replicate the same policy elsewhere pan India, she added. Ms. Badal said the Congress has been deeply involved in its nefarious designs against the country’s farmer when it introduced the Land Acquisition Bill just a month before 2014 general elections leaving no time for the Parliament to decide it. "The Modi led NDA government has rectified Congress proposed bill and made it farmer friendly. Congress does not want the farming community to prosper. The land acquisition bill is an ordinance which entails measures to determine the process of land acquisition by the central or state government of India for various infrastructure and economic growth initiatives. It is governed by The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, which came into force from 1 January 2014. The purpose of this bill is to ensure welfare of farmers to boost agriculture and cater to the developmental needs of the country which are instrumental in determining the over-all progress of the nation. Land acquisition in India was governed by Land Acquisition Act of 1894 as of 2013. On 31 December 2014, Modi government passed an ordinance with an official mandate to "meet the twin objectives of farmer welfare; along with expeditiously meeting the strategic and developmental needs of the country". The new government passed Land Acquisition Amendment Bill in Lok Sabha on 10 March 2015. The Lok Sabha has passed the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015 with nine amendments. However, the opposition parties in Rajya Sabha still stand in resistance. I hope for the sake of the farmers who are bearing the brunt of rain, disaster, politics and etc. a farmer friendly bill to be tabled not a pro- industrialist bill which is being projected according to me. The political game usually ends up demeaning the farmers and the food industry…..we seriously hope that the govt. ends up being reasonable. Till next time!

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Innovate

Sagmeister & Walsh

Rebrand One Of

India's Most Popular Drinks

hen the company behind one of Indiaâ&#x20AC;&#x2122;s most popular beverages, the mango drink Frooti, approached New York-based studio Sagmeister & Walsh to create an extensive branding campaign to pair with its new Pentagram-designed logo, the pair traveled to India to get a sense of its advertising landscape. "We noticed how most of the advertising and billboard campaigns used a similar formula: images of people or product shots with lots of copy," Jessica Walsh, art director of the campaign, writes in an email. "Everything

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is calling for your attention in the same

language. Some places in Mumbai felt like an advertising graveyard." Frootiâ&#x20AC;&#x2122;s new logo is its first in 30 years (many consumers are not happy about the switch), and Sagmeister & Walsh wanted the campaign to stand out from this busy, homogenous landscape. Frooti's parent company, Parle Agro, chose to rebrand the drink as it launches a new juice formula that uses more mango juice pulp. To announce the improvement, the company wanted to give the brand a new look that would separate it from its

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Innovate like the miniature Shah Rukh Khan, had 30 poses. "It would have been much easier to animate the entire thing in post-production, but we wanted to do it with stopmotion photography to give a quirky and endearing look to the animation style." A two-second scene could take more than two hours to shoot. According to Walsh, Frooti director Nadia Chauhan said that India hasn’t seen this style of stop-motion animation in commercials before. Walsh hopes the technique and this miniature world becomes a reusable visual language for the brand for years to come.

largest competitors, like Maaza (a CocaCola-owned fruit drink brand) and Slice. In addition to the commercial, Sagmeister & Walsh designed brand extensions like a Frooti recipe website, which is designed to appeal to older consumers; a social media strategy; fruit-filled GIFs; and Frooti games. See the whole campaign here. Sagmeister & Walsh's solution was to create a miniature world. They used tiny scaled models of vehicles, little people figurines used for railroad train sets, and real mangoes. It was all shot by artist and photographer Henry Hargreaves, who excels at using food as an artistic medium. For the commercials, these worlds were all stop-motion animated. "Only the Frooti packaging and mangoes were kept in real-life scale," Walsh says. "This allowed the packaging and the mango to appear as the hero of the shots, while allowing us to tell stories and add moments of humor in the images." In the various videos, mangoes watch cricket, fall in love, and douse themselves in color for the Holi Festival. Even one of the world’s richest movie stars, "King of Bollywood" Shah Rukh Khan, appears in Lilliputian form in

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most of the Frooti commercial (Khan is the brand’s celebrity ambassador)—for which Sagmeister & Walsh collaborated with filmmaker and artist collective 1stAveMachine and animation collective Stoopid Buddy Stoodios.

The stop-motion animation was a painstaking process. "We had each character in the film 3-D-printed in every single pose they were in during the commercial," Walsh says. They designed every detail down to the clothes each figurine wore. Some characters,

In addition to the commercial, Sagmeister & Walsh designed brand extensions like a Frooti recipe website, which is designed to appeal to older consumers; a social media strategy; fruit-filled GIFs; and Frooti games. See the whole campaign here.

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Chocolate

FOOD OF THE GODS CHOCOLATE INDUSTRY

hocolate is the “Food of the Gods”. And it always will be. Derived from its generic name, Theobroma Cacao– literally meaning “Food of the Gods”, the main ingredient of chocolates is cocoa.The mere thought makes the mouth water bringing a long a surge of emotional associations. It is a vice many love to indulge in!Chocolate’s delicious taste and melt-in-your-mouth texture, unlike that of any other food, gives the consumer a moment of ecstasy. Scientifically, chocolates affect the brain by causing the release specific neurotransmitters, namely phenylethyamine, theobromine and certain flavonoids, acting as an anti-depressant, anti-oxidant and an aphrodisiac. Hence it benefits the heart, mind and soul while tickling the taste

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OF INDIA

buds. In the business world, chocolate is often described as “recession-proof”, remaining resilient despite recessive global market, falling disposable incomes, volatile commodity prices and increasing competition. Simply put, A SAFE BET! Indian Demographics and Chocolate Industry As far as India’s demographics is concerned, it is a country with very pronounced humid tropics suitable for cocoa plantations. In the early 70’s, the plantations were introduced as a mixed crop due to their commercial importance. They are cultivated in the southern states of India, albeit with not too much ease. Off the total cocoa production in our country, 1/3rd of it is produced singularly

by Tamil Nadu. A latest trend that has set its foot in the Indian market is the increasing demand for dark and sugar free chocolates. People are aware of the benefits of dark chocolate and have developed a taste for it. Hence, chocolate manufacturers are introducing medicinal and organic ingredients in their productions so as to remain active in the market.There is a growing awareness for ingredients which takes care of wellness and there are various international certifications for such chocolates too. The recent story Even two decades back, chocolate products in India were primarily meant for the consumption of children. Since

12 www.agronfoodprocessing.com the mid ‘90s, chocolates began to get popularity among the adult population also. The next stage in the evolution in the consumption of chocolates in urban India(chocolate products in the country are largely consumed in urban India) was the graduation of chocolate products into gift items in celebrations and festivities. This trend coalesced during the first decade of the twenty-first century. The

the society in the big cities of India. In order to cater to a more broad-based market, the dessert creators and/or chocolatiers would have to make their chocolate products more affordable, without compromising much on creativity. Without the element of creativity the customized chocolates would not have much relevance. Perhaps the only other way for the artisan chocolate entrepreneurs for catering to a more

Chocolate the chocolate consumption in the country. Not only is the consumption of chocolates is increasing in India, its character also showing a shift. Milk chocolate is the most popular category of chocolates in India, contributing 75 percent to the total sales of chocolate in the country. However, it also pointed out that though dark chocolate ranked third with only 9 percent of the market share, it was expected to be the fastest growing segment of chocolates in the country. The chocolate industry can be segmented by the type of ingredients which is used to produce the chocolates. This includes dark, milk and white chocolates. Moreover, a section of Indian consumers are opting for high-end brands of chocolates in the recent years, which was not seen even a decade earlier. This has led to introduction of premium chocolate products in the Indian market, during the recent past. The high-end spectrum of the Indian chocolate industry is not only reflected by Ferraro Rocher, Kinder Joy, Snickers, Lindt but also by the Toblerone by Mondelez India Foods Private Limited and Alpino by Nestle India.

chocolate products are now giving traditional mithai a competition as gift items during celebrations and festivities. Now the recent trend is projecting chocolate products as energy booster or as a means of satiating hunger. Parallel to the trend of chocolate products being used in celebrations and chocolate products being used to boost energy or satiate hunger, we are seeing the trend of handcrafted and customized chocolates. One’s imagination can be reflected in chocolates, which can enhance the celebratory mood in birthdays and festivities. For example, a heart shaped chocolate in Valentine’s Day can make an added impression for the wooer. Similarly a toy train shaped chocolate cake in a kid’s birthday can bring some extra joy to him. But this trend of artisanal chocolates customized to the individual tastes of the clients is a niche market in India; which is largely confined to the upper echelons of

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price-sensitive market is to somewhat compromise on the quality of ingredients or more preferably, to compromise on the rate of profit by increasing productivity. According to the report of ValueNotes titled Chocolate Industry in India 2014-19 “The chocolate industry in India, valued at Rs. 58 billion in FY 2014, has been growing at a CAGR of 15 percent over the last three years.” ValueNotes estimates that the industry will be worth nearly Rs. 122billion by FY 2019, growing at a CAGR of 16 percent. This scenario can encourage many chocolatiers to make foray into creating exquisite creations in chocolates. The growth in chocolate consumption could not only be attributed to sustained increase in disposable incomes in select but sizeable pockets of urban India, but also because of the influence of globalized tastes on our consumer preferences. The rising popularity of chocolate products as gift items has also perhaps given a fillip to

The latest trends witnessed in the industry reveal that companies are constantly engaged in improving the packaging and adapting the flavor of the chocolates according to the tastes of the consumers. From this we can infer further the rise in popularity of chocolates in the future, across India. The report also pointed out that manufacturers were increasing their investment in the cold chain facilities across the country. This can enhance the supply of chocolate products in India. But despite increases in per capita consumption of chocolate products, the chocolate market is far from being a mature one in India. However, in order to make the chocolate market in India more mature in real sense, two things must be done quickly by the makers of chocolate products. One is to raise the awareness among Indians about the quality of chocolates and develop taste for good chocolates among them, and second is to tap the huge and largely untapped rural market for chocolates. It is lamentable that still 80 percent

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Chocolate needs to assuage concern with healthier products that could transform the market for chocolate. Players of the chocolate industry The industry is dominated by Cadbury India (now Mondelez) and Nestlé India, accounting for nearly 92% of the market share in FY2014. Mars International and Ferrero India are slowly gaining ground in the domestic market with their new product launches.

of chocolate consumption in India is accounted by urban areas. This can be changed only through more affordable packaging and pricing options and introduction of more mass market chocolate products in the near future. Premium brands like Ferraro Rocher and Snickers are unlikely to tap the rural market in a perceptible manner. Presently, the mass market of the chocolate industry is dominated by only two players, Mondelez India Foods Private Limited and Nestle India. Mondelez India Foods Private Limited’s Cadbury Dairy Milk and 5 Star, and Nestlé’s Kit Kat are important mass market brands of India, which could take a lead in exploring the market of rural India in a big way. And of course, the bolstering of our disappointing cold chain infrastructure and more institutions for training potential chocolatiers are also the need of the hour, in order to give the desired momentum to the Indian chocolate industry.

International report, they are Brazil, China, Colombia, India, Russia, South Africa, Turkey and Vietnam. • The most dramatic change in consumer taste is a surge in the popularity of chocolates, especially dark chocolates. • Other important factors include: Premiumization (demand for “moments of happiness”), Convenience (portion control), Value, Variety of Flavors (new combinations, nostalgia, and artisanal ingredients), etc. • An increase in investments by confectionery companies, governments and NGOs in cocoa farmer development programs.

The trends that could transform India’s chocolate industry:

• Digital technology could revolutionize the supply chain as 3D printing is a disruptive innovation that could change the behavior of companies and consumers.

• Eight markets drive 70% of the world’s confectionery growth. According to an

• With obesity a global epidemic, the industry

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Milk chocolate is currently the most popular category in India, contributing to 75% of the total sales of chocolates. Dark chocolate, with only a 9% share of the market, is expected to be the fastest growing segment due to its health benefits and increasing awareness among Indian consumers. Furthermore, preferences of Indian consumers are slowly evolving and getting accustomed to the taste of dark chocolate. Companies such as Cadbury and Nestlé have successfully introduced their own dark chocolate brands, like Bourneville and Nestlé Dark Urban cities account for nearly 80% of the consumption of chocolates. Although distribution in rural India is improving, this segment still remains largely untapped. Poor infrastructure – inadequate transportation and warehousing facilities – is their biggest challenge.

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Chocolate made in Surat be called Swiss or will it piggyback on perceptions and try to chew into the chocolate market pie in India? Foreign player The population of India presents multiple avenues for companies to foray into India. "The regulatory environment, too, has become conducive for foreign players to operate in the country. There is immense scope that the country presents to players in terms of hiring home grown talent to grow business, given the educational boom. This clearly means that the three main factors like demand for products, conducive regulations and customized talent are abundant in India, which makes it inevitable for foreign players to ignore India.

Smaller chocolate packets weighing less than 30g and priced up to INR 10 is the fastest growing segment in rural areas. Increasing consumer demand has led to more and more players entering the market. Cadbury Kraft Foods has been a market leader in the chocolate category since the last 64 years in India. The chocolate is worth Rs 3,200 crore in India of which Cadbury Kraft Foods has a 70% share, 20% is held by Nestleand the others operate in the remaining 10%, which forms around Rs 310-320 crore. "The chocolate industry in India works at different levels that include chocolate giants like Cadburyâ&#x20AC;&#x2122;s, Dairy Milk, etc., small chocolate manufacturers, chocolate retailers, chocolate importers and people who make chocolates at home. Diversification and innovation is the need of the hour and chocolatiers are exactly doing that to increase their client-base. Premium chocolate Ferrero entered India in 2004, when it set up a branch office in Chennai. At the time, India hardly had a market for premium chocolates that cost more than Rs 25. Since India is a price-sensitive country, most brands offer products at low prices in small packs. Market leader Cadbury has been selling its flagship

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brand, Dairy Milk, at an entry price of Rs 5 for over a decade now. That has changed today. Premium chocolates now make up about 27 per cent of the Rs 3,000-crore chocolate market in India, according to consultancy Technopak. Besides Ferrero, several companies including Cadbury, Nestle, Mars, Hershey and Lindt compete in this segment. Cadbury - with its Celebrations, Bourneville, Silk and Toblerone brands - is the market leader with more than 60 per cent share in the premium segment and 70 per cent overall, according to data provider Nielsen. Another premium chocolate added to the cart in India is Schmitten, a brand of luxury chocolates, created by the Rs 3,500-crore Rajhans (Desai Jain) Group. While the coco beans are Ghanaian and the recipe Swiss, the unit boasts of state-of-theart equipment from Switzerland, Denmark and Germany. But can a chocolate

Patchi, a chocolate brand from Lebanon with over 300 stores worldwide opened its franchise store in Delhi, and believes that there is no competition between international chocolate brands and the Indian ones. The client-base is different for international brands. People who generally buy chocolates of an international brand have a good purchasing power and are looking for quality. The Indian market is sensitive to the price. If the price of a product is high, it cannot be consumed by the masses. Also, in terms of importing, for franchises, it is a bit difficult because the price of the dollar is not fixed. For example, Patchi chocolates in Dubai are cheaper than the ones in Delhi."

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Snacks

Bold entrepreneurs

redefine snacks, now

Meat Snacks

o one – anywhere – forecast the big change that’s sweeping over meat snacking. Five years ago, meat snacks were an unhealthy, maleoriented legacy category. Then startup Krave revitalized the segment with

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new, more modern flavours and fresh packaging, gaining a new – and more female – audience along the way. Now, sales of meat snacks are surging upwards with growth of 20% annually

for many countries over the period 20122014. The unexpected rejuvenation of meat snacking reflects how much opportunity there is in snacking to innovate in unpredictable ways, to reinvent categories, to use new ingredients and product types and create new brands. “It’s entrepreneurs like Krave, start-ups and small companies of all kinds that are grasping the opportunity to innovate

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Snacks • For many people snacking has replaced main meals from breakfast through to dinner – according to Neilsen, between 40% and 60% of consumers in different regions of the globe often replace a meal with a snack. Snacking has become the number one strategic opportunity for companies around the globe. Consumers are willing to consider any type of food from any category as a possible snack. As Jon Sebastiani, founder and CEO of Krave, puts it: “Our competition is not only other jerky manufacturers. Any snack item is competing for ‘share of stomach’.”

with snack products in ways that were not imaginable five years ago, creating totally new propositions, new brands and new markets,” says Julian Mellentin, author of the new report from New Nutrition Business, Redefining Healthy Snacking: 20 Case Studies in Growth and Innovation. “The businesses that are proving successful are the ones that are creating new markets with new, differentiated snack concepts, often using new ingredients and processes, often sold under new brands (or old brands that have been boldly reinvented) with new messages,” adds Mellentin. “They do not follow the market with predictable products.” Soreen is a traditional cake brand that “boldly reinvented” itself after years of stagnation by boosting its fruit content, delivering a sustained energy message and providing its product in on-the-go snack formats – changes that have made it a cult success with athletes. The accompanying graphic shows how creatively companies are reinterpreting existing formats – using sprouted grains for extra nutritional benefits in baked snacks, for example, or crafting chips out of beans – and using totally new

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ingredients, such as chia seeds and insects, to make snacks that consumers had no idea they wanted. These small companies are succeeding because: • Consumers’ beliefs about what healthy means have fragmented massively, creating a wealth of niches that can be used as platforms to build successful brands. Big companies tend to overlook areas that seem too small, leaving the way clear for entrepreneurs and start-ups.

And Daniel Lubetzky, founder and CEO of Kind bars, tells New Nutrition Business in the report that he sees plenty of further opportunity in snacking. “We’re like at [square one] of a revolution because more and more people are on the go and require snacking options because of that; and more people are tired of putting stuff into their bodies that isn’t recognizable. So they’re looking for more healthful options. He adds: “When you combine those trends, the opportunity to innovate in healthy snacking is just at the beginning.”

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y Neil Giles, Marketing Communications Manager, Mettler-Toledo Product Inspection

Consider a hypothetical scenario: a food manufacturer invests in a new x-ray inspection system and places it at the end of his production line to catch and remove any non-conforming products before they leave the manufacturing plant. Installation complete, the company sits back, congratulates itself, and waits for the expected benefits to roll in. What the manufacturer finds though is that while the technology identifies the contaminated products that need to be removed from the line, it only does so at the very last stage where this can happen, and that is after several earlier processes have already added value to the raw ingredients. Savings are therefore not what they may have hoped for – in fact, the unnecessary extra processes are costing even more money – and neither does the manufacturer have any real indication as to where exactly in the production line the problem is occurring.

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This hypothetical manufacturer has not really thought through how best to approach product inspection. He has seen it as a standalone process, a last moment check before goods go out to the retailer. What he needs to do is to think about product inspection in a holistic, integrated manner – a view that focuses on the whole of the production line and the interdependence of the individual components. This can result in the incorporation of a number of complementary product inspection technologies on the same manufacturing line, ideally all linked to a central computer network. Why do it? The benefits of such an approach are numerous, but they all essentially relate to three key requirements for any food or beverage manufacturer anywhere in the world today: • Complying with food safety legislation, • Maintaining consistent product quality, and • Optimising production line efficiency to

Food Safety

Product spection: tegration is the ideal

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Food Safety product inspection programme is to start with a Hazard Analysis and Critical Control Point (HACCP) audit of the production line. This takes into account the entire manufacturing process. It identifies the greatest risks to product safety and quality on the production line, and provides guidance on where to establish Critical Control Points (CCP's) to mitigate the risk of contamination occurring.

improve bottom line performance. Every manufacturer wants to maximise detection rates for non-conforming products, and efficiently inspect for multiple safety and quality issues. A single, integrated production line enables them to do so, delivering greater adherence to legislation and facilitating earlier detection of problems, which in turn reduces waste and cost. As costs of raw ingredients are rising and operating costs, for labour and energy, for instance, are increasing, this can make a significant contribution to reducing overall production costs. In addition, this also facilitates compliance with the food safety regulations in effect in each of a manufacturerâ&#x20AC;&#x2122;s market, for example the British Retail Consortium (BRC) Global Standards in the UK, the International Featured Standards (IFS) in France, Germany and other European countries, the Food Safety Law in China or the Food Safety Modernization Act in the US. A single computer network that oversees this integrated production line and its complementary manufacturing and inspection technologies would simplify job set-up and changeover, and reduce the risk of operator error. Such a system can additionally provide an all-encompassing data picture of the performance of the entire production line â&#x20AC;&#x201C; not just one individual component. Analysis of this

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can help bring about the detection of underlying adverse performance trends that can be corrected earlier, reducing maintenance downtime and redoubling the efficiency gains that come with integrated product inspection. As a result, manufacturers may enjoy enhanced Overall Equipment Effectiveness, reduced Total Cost of Ownership, and a healthier bottom line, putting them in a better position to take advantage of new market opportunities. How to do it? The ideal way to approach the development of a holistic, integrated

There is no one-size-fits-all solution because every production line is different. Armed with this information, a manufacturer can understand what inspection technology is needed and where it will be most effective in solving the production line issue that has been identified. For example, if product giveaway has been identified as the main problem on the line, then the installation of a checkweigher or x-ray system with feedback control immediately after the filling system will be ideal solutions. If a manufacturer wants to reduce product waste through contaminant detection, then a metal detector or x-ray system at the beginning of the line will ensure that foreign bodies in raw materials are removed before too much value has been added to the product. This solves exactly the problem outlined at the beginning of this article, and saves unnecessary loss. The efficiency of the entire production line can be enhanced through the use of networking software such as data management software, notably Mettler-

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Food Safety such as seal integrity, and verify label and print quality and positioning. Many industry suppliers are capable of providing expert support and guidance in these matters, for example a combination system may be more appropriate, such as a checkweigher and metal detector solution. This one-process, space-saving system will allow manufacturers to quickly determine the weight, while rejecting metallic contaminants – all in a single operation.

Toledo Product Inspection’s Prod-X. This technology ensures that the whole process is integrated, that set-up and management are carried out from a single location, even perhaps remotely, and that data gathered from the equipment can be stored and analysed in a central repository.

Upholding brand reputation for manufacturers is paramount to satisfy consumers that they are only receiving genuine, quality products. As such, product inspection solutions can be deployed to inspect packaging defects,

Conclusion The manufacturer that adopts the holistic, integrated approach to product inspection described will be better able to maximise quality control on their production line, while also optimising efficiency and controlling costs. They will be more confident in their compliance with safety legislation and more likely to succeed in the highly competitive, crowded and globalised food and beverage market, especially when competing against manufacturers who do not embrace this 360 degree solution to quality control.

Central govt tell states to use e-auction to procure Agri Commodities

he central government has written to all state governments to opt, where possible, for e-auctions to procure agricultural commodities. This was done a few days before the Union Budget was presented. This is part of a plan to get going in a national common market for agri products, linking all the wholesale markets run by Agricultural Produce Marketing Committees (APMCs).

According to the official Economic Survey for 2014-15, there are 2,477 principal regulated markets based on geography (the APMCs) and 4,843 submarket yards regulated by the APMCs. The Centre aims to link all these, to create one market. The first step has been to get each state to change its APMC law, to allow private market yards or markets. Some states have denotified fruit and vegetables from their Act. This is not considered enough and

Vol.10 Issue 06 APRIL 2015

the recommendation on e-auction is the next step. Half a dozen states have begun procuring sugar for public distribution by using the e-auction facilities provided by NCDEX E-Markets (NEML), a subsidiary of the National Commodities and Derivatives Exchange (NCDEX). The Centre has lauded NCDEX’s mandi modernization programme (MMP), under which all APMCs of Karnataka have already been linked electronically and farmers get one state price for commodities traded on this common platform. The Survey said in Karnataka, 51 of the 155 main market yards and 354 sub-yards have been integrated into a single licensing system. Rashtriya e-market Services, a joint venture created by the state government and NCDEX Spot Exchange, offers automated auction and post auction facilities (weighting, invoicing, market fee collection, accounting), assaying facilities in the markets, facilitation of warehouse-based sale of produce, commodity funding

and price dissemination NCDEX is also implementing a Unified Market Platform, whereby all mandis in the state are being unified for single trading. Apart from Karnataka, it has started unifying mandis in Telangana and Andhra Pradesh. Among other states in discussion with NEML are Punjab, Haryana and UP. NCDEX has also launched forward trading in several agricultural commodities, such as castor seed, cumin, maize and sugar. Says Samir Shah, managing director of NCDEX, “Exchange-traded forwards available on the national online platform of NCDEX plug in the missing link in the organised commodity value chain. The exchange has started a membership drive especially for farmer producer organizations, through which farmers can sell their produce directly on the NCDEX forwards segment. There are lakhs of physical traders who buy commodities from APMC markets nationwide. The forwards segment provides them an alternative platform to sell these.”

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  

 

 



     

 

   

 



                



  

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Supply Chain

SUPPLY CHAIN INNOVATIONS IN FOOD AND BEVERAGE INDUSTRY

Basma Husain

mid rapidly transforming supply-and-demand pressuresâ&#x20AC;&#x201D;from a growing middle class in developing markets to increasing weather volatilityâ&#x20AC;&#x201D;the leading food and beverage companies are rethinking their supplier relationships. As the path from farm to fork narrows, the world is moving to a global industrialized system of food production. In the next decade, a small set of companies will likely control the vast majority of the food supply. Key commodities supplied by a few large market players include: starch and vegetable fats and oils manufacturing, wet corn milling, soybean

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processing, sugar manufacturing, creamery, butter manufacturing, and dry pasta manufacturing. The world's seven billion consumers will have more than 70 percent of their choices provided by 300 to 500 companies. Farmers and producers are more likely to be corporations and consumers will likely be serviced by large global retail and restaurant chains. Future competition will not be between companies but rather supply systems. Forward-thinking operators, distributors, and manufacturers are already reevaluating their sources of supply.

constraints may limit the number of companies that have the internal resources to manage supply volatility and regulatory requirements. Access to approved suppliers will become more difficult; dedicated supply systems will be required to assure adequate supply and manage costs in a volatile environment. To win the competition between supply systems, successful companies will need to ensure their sources of supply and develop strategic partner-ships with suppliers that have the tools, resources, and agility to achieve a competitive.

The food system's industrialization is speeding up as new market demands emerge, and regulatory and resource

For critical commodities, price-based relationships will evolve into more strategic relationships, in order to counter

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Supply Chain older, more inefficient assets.” Lines of the Future are driving significant savings in reduced engineering, installation and start-up costs. And we're reducing conversion costs through increased throughput, less waste and lower staffing per line.

the disruptive changes affecting supplydemand dynamics. Over the next decade, it is very likely that supply availability will trump price as the crucial factor in supply decisions. Ensuring availability requires rethinking current criteria for supplier evaluation, identifying the right set of suppliers, and selecting suppliers that can offer a complementary set of capabilities to improve a company's overall position. These suppliers will also be integral to achieving value beyond cost—this value could simply be securing supply, or it could be other factors such as innovation or improving capital return. Global innovation in supply chain Success in the food and beverage industries has to go beyond appealing to consumer tastes and health trends — food and beverage companies have to look inward as well. Whether it’s creating a more efficient production line, scaling back on facilities, or speeding up a product’s time to market, companies are looking for new strategies to improve their bottom lines in ways other than simply appealing to the cravings and wallets of the typical consumer. Still beyond that though is the rise of sustainability in supply chain innovations. More food and beverage companies today are employing measures to conserve water, reduce carbon emissions, protect animal welfare, and decrease fuel consumption than ever before.

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Mondelez International hasupdated its strategy to reinvent its supply chain to achieve margin goals. This is a threeyear plan that includes $3 billion in gross productivity savings, $1.5 billion in net productivity, and $1 billion in incremental cash flow. As a significant part of this strategy, Lines of the Future are “more efficient, modular designs for global product platforms” that “are cutting conversion costs by 30 percent in biscuits and 20 percent in chocolate and in gum as they replace

The company is also focusing on a reconfiguration of its end-to-end supply chain network, which includes funding new or expanded plants around the world. From 2013 to 2015, Mondelez will have taken on 11 such projects, including Bahrain, Brazil, China, and India, with the outlook of another five sites by 2018. Diageo has plenty to gain from realigning its supply chain to set itself up for success. Diageo spent over $250 million on its transformation that included a production network redesign, internal process enhancements, technology standardization, and a fundamental shift in focus from cost savings to product delivery and revenue growth.” As part of this strategy, Diageo invested in high-speed lines, some of which were dedicated to agility and responsiveness, which optimized production facilities and brought products to market more quickly. This effort “supports new product introductions and enables Diageo to be

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Supply Chain Another sustainability practice, sourcing from local/micro suppliers, was a chief asset to SABMiller, which launched a low-cost beer in conjunction with Nile Breweries Uganda by sourcing the sorghum used to produce the beer from local farmers. Also, according to the report, Coca-Cola sources ingredients from 50,000 farmers in Kenya and Uganda for its "locally" sold fruit beverages. According to the report, Coca-Cola also operates the “largest fleet of heavy-duty hybrid electric trucks in the world with more than 750 hybrids in North America alone.”

‘first to shelf’ and ultimately increases revenues from new products.” Diageo has reaffirmed its commitment to sustainability and responsibility by pledging more initiatives to reduce water use and carbon emissions by 2020. This includes goals to lower direct operations' absolute greenhouse gas (GHG) emissions by 50% plus a 30% decrease across the whole supply chain as compared to 2007. Diageo also plans to “reduce total packaging by 15 percent, while increasing recycled content to 45 percent and making 100 percent of packaging recyclable,” as compared to 2009. World Economic Forum recognizes empowered food value chains Many major food and beverage companies are looking toward sustainability to improve their supply chains—and ultimately their bottom lines and brand images—and some are being recognized for those efforts. In its report, “Beyond Supply Chains – Empowering Value Chains,” World Economic Forum named 25 companies that boosted revenue up to 20% and cut up to 16% of supply chain costs by putting sustainable supply chain practices in place. Among those companies were Nestle SA, SABMiller plc, Coca-Cola Co., PepsiCo Inc., Ahold, and Unilever. Nestle was recognized for holding their suppliers accountable to a “nodeforestation” policy on palm oil. Nestle along with PepsiCo also “bundled their warehousing, co-packaging and outbound

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distribution of fresh food products leading to logistics, cost savings, service level improvements and carbon reductions.” Nestle also employs traceability requirements for its suppliers, who must report on their supply chain, specifically the origin of products provided to Nestle, so the company has a comprehensive picture from farm to consumer. Last year, Nestle also signed a partnership agreement with NGO World Animal Protection and pledged to protect animals from hundreds of thousands of farms in its supply chain, which Nestle uses to source its dairy, meat, poultry, and eggs, by employing tighter animal welfare standards. The company became the first major food company to partner with an animal welfare NGO, according to its press release.

Besides the product itself, the supply chain is arguably the most critical component of delivering consumers what they want to eat and keeping food and beverage companies and their brands financially alive and well. Many more examples of supply chain innovations can be seen spreading across the food and beverage industry today, and as more companies take notice and follow suit, still more are sure to come. Indian Supply chain scenario India – World’s Leading Producer of Fresh fruits and Vegetables, Pulses, Rice and Wheat. Yet Malnutrition is a common phenomenon in India. 60% of children in India are underweight and malnourished and as a total 21% of the total population is malnourished. According to World Bank, productivity losses in India due to stunted growth, iodine deficiencies and

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iron deficiencies are equal to almost 3% of GDP. Growth in Agricultural Productivity and processed food has increased from 40% to 500% in the past 40 years, yet the availability of food remains a problem for many households in India. Poor Transportation System, Inefficient chain of traders, Absence of sheltered storage and cold storage facilities, Poor Food packaging are said to be the main reasons why Food Distribution in India is so poor. When Federation of Indian Chambers of Commerce and Industry (FICCI) undertook a survey find out bottlenecks in Indian Food Industry, they found that 44.25% of Respondents quoted Inadequate Infrastructural Facilities as a main challenge. Infrastructural Facilities mainly

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comprises of Logistics network and Warehousing. To overcome the Barriers in the supply chain the food and beverage industry has to to the following things;

Supply Chain Encouraging 3PL (Third Party Logistics) Players 3PL are Service Providers who take care of End to End Delivery. The concept of single Logistics Service Provider (LSP) is at an infant level. Government must encourage 3PL players by easing the norms. A single logistics service means that there will be no loss of Food produces in between due to the presence of various players. Warehousing with Private-Public Partnership Government must encourage Private firms to set up Warehouses. The Government has already shown interest in this scheme, though Private Players are not very interested. There have been few cases of Private Public Partnership in this sector. Adani Agri Logistics has tied up with Food Corporation of India (FCI) and has set up State of the Art Warehouses at seven places in the country. It has currently capacity of 0.6 mn Tons and is planning to increase the capacity to 2 mn Tons. Fully Integrated, IT enabled Operations makes sure that there is no loss in both Quality

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Supply Chain Indian farmers.

and Quantity of the Food Grains. These type of Firms must be encouraged by the Government.

easily carried. This enabled the retailers to store the Coke bottles without having to spend anything.

Increasing the Cold Storage Facility India is the World’s leading Producer of Fresh Fruits and Vegetables, but 40% of it is wasted due to absence of Cold Storage. It is a common phenomenon to see the Tomatoes and Onions being overproduced during the rainy seasons and thrown away as garbage due to the absence of buyers. Since there are no storage facilities, the farmers don’t have any other way to sell the products.

A similar scheme can be implemented by the Government, where the farmers can be given subsidy to buy such Solar Coolers. This would enable them to store the fruits and vegetables before selling. This will decrease the farmer’s dependence on middle men and the farmer can sell the produce as per the market demand.

If Storage Facilities are present, the vegetables can be stored for a longer time as shown in the below Figure. The storage facilities will be beneficial to both the Farmer and the End Consumer. Cold Storage Life of Vegetables. Source: Ministry of Micro, Small and Medium Enterprises, India Some Cold Storage Warehouses could be created just outside the major cities. This will enhance smooth transit between different Transportation systems and will also smoothen the effect of Truck Curfew. Enabling the Farmer – The Coco Cola Way In order to increase sales in Rural Areas, Coco Cola provided the retailers with small Solar Coolers ‘eKOCool’. They can store 48 cool drink bottles and can be

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Partnership with Farmers – The PepsiCo way PepsiCo India has worked closely with farmers to help improve both their livelihoods and agricultural yield. Their journey began with successful introduction of a high-yielding variety of tomato, and then went on to help paddy farmers increase their crop. Today The company’s top ventures into crop diversification and the farming of high-quality potatoes and other edibles have transformed the lives of thousands of

Preparing for the Next Decade In the next decade, increased consumer demand, changing consumer tastes, increased regulations, limited availability of arable land and water, and consolidation within the commodity industry will put pressure on sources of supply. The market's future leaders are those that are challenging their own thinking and pursuing solutions to take advantage of global opportunities while mitigating global risks. They are collaborating with key suppliers to drive innovation, establish sustainability strategies that reach across the entire supply chain, manage their supply risk, ensure product quality and safety, and create long-term cost advantages based on strong category management. Rethinking supply requires all levels of food and beverage leadership to ask the hard questions, to make choices between suppliers based on future potential, and to influence, integrate, and invest where appropriate in sourcing initiatives with longer payoff horizons. Marketing strategies need to anticipate rapid changes both in consumer tastes and ingredient availability. The future is bright for companies that know their strategic suppliers and develop relationships that achieve innovation, share risk, and provide for ongoing product security, sustainability, and long-term advantage.

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Value Addition

Beyond Milk

Value Added Dairy Products to boost up profits

he time has arrived for dairy players to skim the cream out of the milk business. Rising consumption coupled with better margins in the value added dairy products (VADPs) are driving the dairy players to get into the growth and higher profitable trajectory. Change in demographics and rapid urbanization have resulted into manifold surge in the demand for VADPs. Milk products such as curd which were largely home products are currently available under various brands. Due to convenience, health benefits and increased consumerism, milk derivatives like buttermilk, low fat yogurt and flavored milk are nowadays part of regular consumption. The traditional way…. For decades, dairy players in India have been engaged in the liquid milk processing

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activity only. Backed by operation White Flood in 1970s, the milk industry in India witnessed the first wave of development in the milk production which gave India its status of the largest milk producer in the world. This was spearheaded by the ‘Cooperatives model’ which was supported by the Government. Ownership being with the farmers instilled trust among the member milk producers in the cooperative model, which also ensured transparent returns. In addition, cooperatives also provided various services like cattle vaccination, cattle insurance, artificial insemination, installation of coolers at village level etc. to improve productivity. Further, there was minimal involvement of private players in the industry as approximately 80% of the retail price of the liquid milk went back to the farmers

leading to low operating margins (45%). This was despite the consistent upsurge in the retail prices of the liquid milk. Consequently, the dairy companies were left with insufficient internal funds to plough back into the operations for adoption of modern technologies or development of milk variants. The above reasons coupled with factors such as evolving tastes and preferences, higher affordability, etc., lead to the entities venturing into the VADP segment for better profitability. Going the creamy way…. Over the past decade, significant transformation took place in the Indian demographic space which led to heightened consumer interest in VADPs. This shift in the dynamics of the industry proved beneficial for the manufacturers

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Value Addition brown-field/ greenfield expansion, global dairy companies too are venturing into milk derivatives business in this part of the world.

since margins in VADPs are more than double the margins in the liquid milk segment. The profitability in liquid milk space ranges from 4-5%, whereas the profitability in VADPs ranges from12% to 18%, attracting private participation in the industry. As per the industry estimates, the share of VADP in the milk and milk derivatives segment is growing currently at around 25% every year and is expected to grow at the same rate until 2019-20. Product innovations are likely to accelerate India’s dairy market which is anticipated to improve industry margins by attaining greater scale, higher capacity use and an increasing contribution from new milk variants. Further, the development of processing and packaging technology along with improvement in retail and cold storage infrastructure has increased the shelf life of dairy products. Growth trajectory As per NDDB, the Indian dairy industry is all set to experience high growth rates in the next eight years with demand likely to reach 200 million tonnes by 2022 from 132 million tonnes in 2013. Presently, only 20% of the milk production comes

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from the organized sector comprising co-operatives and private dairies. The paramount factors driving the growth in the dairy sector include rising disposable incomes, advent of nuclear families and fast/instant food gaining ground in India. Other factors such as structural changes in food habits, expansion of fast food chains and popularity of pizzas and pastas aided the usage of milk variants of mozzarella cheese, processed cheese and flavored milk etc. Increasing participation from the private sector Consumer preference towards VADPs is taking forward the dairy sector. Besides

The most recent one is the 100% acquisition of Tirumala Milk Products Pvt Ltd by Groupe Lactalis SA, France, one of the largest dairy players in the world. Another French dairy major Danone has also increased its presence in the Indian dairy sector with slew of product launches such as flavored curd, yoghurt etc. Other investments include Nestle India’s acquisition of 26% stake in Indocon Agro and Allied Activities PvtLtd and Hatsun Agro Products Ltd acquiring 100% stake in Jyothi Dairy Pvt Ltd. Companies such as Parag Milk Foods Pvt Ltd, Prabhat Dairy Pvt Ltd have augmented their capacities in the recent past to meet the increased demand of milk products. Investors’ attention India consumption story and diversification by dairy players into VADPs are drawing interests of investors

35 www.agronfoodprocessing.com which have led to surge in the PE deals. The prominent deals include investment

by IDFC and Motilal Oswal in Parag Milk Food Pvt Ltd, Rabobank group and India Agribusiness Fund in Prabhat Dairy Pvt Ltd, IFC into Modern Dairies Ltd and Blackriver Investment in Dolda Dairy Ltd. In one of the most recent investments, Fidelity Growth Partners, India, along with participation of the existing social venture investor, Aavishkaar, have

Value Addition

invested in Odisha-based Milk Mantra Dairy Pvt Ltd. Recent deals in the sector

are the indication that the investors perceive value in the deals and see growth prospects in the Indian dairy space. Right product mix likely to have a positive impact on the credit profile of dairy companies and traditionally, the credit risk profile of dairy companies was characterized by low profitability and moderate liquidity. The dairy companies rated by CARE are largely in the BBB

or BB category (refer the graph below) primarily on account of moderate solvency profile. However, Mother Dairy Fruit And Vegetable Private Ltd, Co-operatives associated with Gujarat Cooperative Milk Marketing Federation and some private dairies are in the ‘AA’ and ‘A’ rating category on account of their superior procurement and marketing channels and high share of VADPs in product portfolio. During FY14, the credit profile of CARE rated dairy companies have broadly remained stable. The entities with the right product mix of liquid milk and VADPs are expected to have better profitability and solvency parameters. Consequently, there is a high possibility of improvement in the credit profiles of such companies given the robust milk procurement and distribution system.

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Milk Outlook

2015

fluid milk

projection

4.6 percent increase is expected CY 2015 fluid milk production is projected to increase 4.6 percent to 147 million metric tons (MMT) assuming a normal monsoon and continued private and public sector efforts to improve farm management and production through extension services. CY 2014 and 2015 non-fat dry milk (NFDM) production levels are projected at 520 and 550 MMT on growing domestic demand for reconstituted milk during the lean season and expectations of continued strong export demand. CY 2015 combined butter and ghee (clarified butter) production is projected to rise 3 percent to 5 MMT on strong domestic demand. (Note: Post production, supply and demand (PSD) estimates for fluid milk, NFDM, and butter have been revised to reflect the calendar year in lieu of the April/March marketing year).

roduction Policy and Environs Indiaâ&#x20AC;&#x2122;s dairy industry challenges mainly include low farmer knowledge/expertise, less land due to urban sprawl, a declining water table, animal disease, and insufficient animal feed and fodder, which affects dairy productivity. Limited resources and inputs, especially feed, have reportedly caused dairy prices to rise in the last few years (see Figure 1 below). In order to address these issues, the government of

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India (GOI) offers subsidies and other assistance through schemes to enhance production, including allocating monies to the Indian Council of Agricultural Research to increase research and development. However, government initiatives only focus on assisting statesupported cooperatives and processors. It is unclear whether these initiatives will be able to boost dairy production to meet Indiaâ&#x20AC;&#x2122;s future demand needs. For a detailed list of other ongoing government

initiatives, please see GAIN reports IN4080 and IN3098. Founded in 1965, the NDDB has focused on developing dairy cooperatives (in 2013, approximately 15.1 million dairy farmers were members of a dairy cooperative) through extension services and other programming. The NDDB is in charge of implementing the National Dairy Plan (NDP), which currently concentrates on genetic improvement,

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Milk Outlook products.

animal nutrition, and procurement in the dairy sector. Phase I of the NDP will be implemented from 2011-12 to 2016-17, and has a financial outlay of USD $416 million (more than 20 billion rupees). The first phase is focused on 14 major milk producing states: Andhra Pradesh, Bihar, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar pradesh and West Bengal. These states account for over 90 percent of total milk production. For more information on the NDP, please refer to IN2031. In recent years, more private sector dairy processors have entered the market. Some private sector processors provide farmers access to modern extension services, which help improve farm management, feeding, fertility (including artificial insemination and genetics), food safety/hygiene, and veterinary care. In return for these services, farmers agree to provide milk to collection centers owned by these private companies.

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Dairy farmers are paid by volume and fat and solids-not-fat content. Consumption: CY 2015 fluid milk consumption is forecast to increase 4.8 percent to 59.75 MMT on population growth and rising incomes, which has resulted in Indian buying more nutritious food, especially milk and dairy products (see figures and commentary below). CY 2015 NFDM and butter consumption is forecast to increase to 475,000 and 5 MMT on population growth and demographic shifts that are increasing demand for ready-made dairy

As income levels increase, more Indians are purchasing less grain and more highervalue, nutritious products such as milk, fish, meat, poultry, fruits, and vegetables. Because of Indiaâ&#x20AC;&#x2122;s predominant Hindu population, which is mostly vegetarian, many consumers receive their daily protein requirements from food sources that do not contain animal protein. Although these protein requirements can be derived from pulses and other vegetable products, many Indians also consume milk and dairy products, which are important ingredients in most Indian meals. According to contacts, demand for pasteurized milk produced by processors in the formal/organized sector continues to grow, which may be because consumers believe the product is safer than milk produced by the informal/unorganized sector (i.e., milk produced on-farm and sold via steel canisters on the roadside). As incomes and demand for safe, higher quality dairy products rise, this likely will press the formal dairy sector to expand. The outstanding question is whether the formal dairy sector can expand rapidly

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Milk Out look characteristics). In order to address food safety issues in the dairy sector, the central government has enacted a scheme called Strengthening Infrastructure for Quality and Clean Milk Production, which is aimed at improving milk quality at the village level. The scheme involves monitoring data collected from milk collection centers, which is further analyzed by FSSAI officials involved in creating food safety policy Trade: Exports

enough to meet increasing demand, especially since it only represents approximately 20 to 30 percent of total dairy production. Rural consumption of dairy products is increasing. According to Food and Agriculture Organization data, in the last ten years, the undernourished (i.e., daily caloric intake is insufficient for a healthy, active lifestyle) Indian population has declined, which means more Indians in lower income brackets are meeting their daily caloric requirements. Increases in rural dairy spending may indicate that segments of this population are purchasing more nutritious foods to meet this calorie requirement (see Figure 5). Although urban dairy spending is falling, Indians in higher income brackets are also buying more non-food items, which may explain the declining share (see Figure 6). Changing demographics have also affected dairy consumption patterns. More women are pursuing careers, especially those living in urban areas. With less time to cook meals at home, more families are buying ready-made dairy products like table butter, yogurt, paneer, and other ethnic dairy desserts. Others are trying new processed products that were never traditionally made in the home such as processed cheese, flavored milk, probiotic drinks, ice cream, and baby foods.

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Processing and Food Safety For pasteurized milk and dairy products produced in the formal/organized sector, government-owned dairy facilities and some private sector actors monitor milk quality and safety before it is further processed. However, food safety continues to be a challenge due to poor farm management and the presence of a large informal/unorganized dairy sector, which represents approximately 70 to 80 percent of total dairy production. A recent Food Safety and Standards Authority of India (FSSAI) study conducted in 33 states found that 68.4 percent of milk samples were adulterated with detergent, fat, urea, and water. Nearly 46 percent of these samples were diluted with water in order to increase volume (farmers are paid based on volume among other

NFDM exports are primarily sold to milkdeficient countries such as Bangladesh, Egypt, Algeria, Sri Lanka, and Pakistan. In much smaller volume, India also exports milk powder (casein), butter, and other dairy products to neighboring countries. CY 2015 NFDM exports are projected at 75,000 metric tons on expectations of continued strong regional demand. CY 2014 NFDM export estimates are revised to 70,000 metric tons on slower export pace. CY 2014 and 2015 butter exports are forecast at 10,000 MT on strong regional demand. CY 2013 butter exports are revised according to customs data. Imports Historically, India has irregularly imported dairy products, such as milk

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Milk Outlook candies, confectionary, and food preparations made with milk or milk solids. The ban was first implemented in September 2008, and has been in effect for almost six years. Please refer to GAIN reports IN1057, IN1106, IN2001 and IN3061 for further information.

powder and butter, to put pressure on high domestic prices. U.S. dairy products exports are effectively prohibited under Indiaâ&#x20AC;&#x2122;s sanitary import protocol.

were published in February, 2011 and March, 2013. In June 2014, the MOA published two draft health certificates, which are required to import bovine semen and embryos. Both drafts provide new or revised information on import requirements. For example, the genetic disease freedom clause has been removed from both certificates. According to MOA officials, the new draft health certificates

For many years, the GOI has encouraged the use of foreign bovine germplasm to increase dairy productivity. Some Indian states are discussing how to further incorporate indigenous genetics due to concerns about animal disease, maintaining biodiversity, or exploring other challenges such as improving feed conversion ratios due to a lack of feed and fodder. These policy discussions may eventually affect future germplasm demand for some Indian states (agricultural policy is a state subject). Retail products

Value-added dairy products continue to gain popularity. Although many Indian palates prefer paneer, some global industry experts predict that dairy cheese consumption will increase by approximately 15 to 20 percent on an annual basis, potentially spurred by the influence of western foods such as pizza and burgers. Packaged yoghurt is a small niche is the worldâ&#x20AC;&#x2122;s largest dairy producer. According to market since most the National Dairy Development Board (NDDB), Indian households prepare The MOA is responsible for dairy demand in 2021-22 is estimated to be between 200 plain yoghurt (i.e. dahi) issuing sanitary permits for milk to 210 MMT. From 2007 to 2012, Ministry of Agriculture at home. However, and dairy product imports. Dairy reportedly, more urban (MOA) statistics show a 4.5 percent increase per year for families are buying products are regulated under the Food Safety and Standards dairy production. Using MOA statistics from 2012-13, more packaged yoghurt Regulations, which replaced Indian dairy production needs to grow approximately 5 due to convenience, the Milk and Milk Products percent per year in order meet NDDBâ&#x20AC;&#x2122;s 2021-22 demand including drinking Order, 1992 on August 5, 2011. projection. yoghurt such as lassi. Please see IN4070, IN 3119, and Ultra-high-temperature IN1174 for more information on (UHT) milk also is a import procedures, food safety small niche market requirements, and other policies. since culturally many have been forwarded to the World Trade Indians prefer fresh milk. Yet, more In December 2013, the MOA revised Organization for comment. consumers are experimenting with quality guidelines for bovine germplasm UHT milk due to its longer shelf life. imports. Some industry sources believe On June 19, 2014, FSSAI issued an According to Rabobank, from 2012-13 the new guidelines are less restrictive, advisory extending the ban on Chinese to 2019-20, the overall market share for but it is unclear if trade will increase due milk and dairy products until June value-added products will increase from to additional requirements imposed by 22, 2015. The advisory also prohibits 21 to 31 percent. many Indian states. Previous iterations chocolates and chocolate products, Policy: Trade Policy Milk and dairy product imports are subject to tariff rate quotas and require an import permit and sanitary certificates. NFDM and butter oil imported above the TRQ attracts a 60 and 30 percent basic duty. Table 1, at the end of this report, provides tariff structure India details.

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Cover Story

Food processing, Agriculture, &

“Make in India campaign” Firoz H Naqvi

A critical analysis

While going through the Make in India Portal of food processing and agriculture, I saw a lot of potential and great intention for both these sector. But since its application and revolution both these important sector became the back bencher and were given back seat treatment as compared to other manufacturing sector. This analytical article critically scrutinizes the portal, www. makeinindia.com, its content and negligence of govt. toward the food industry.

ake in India’s food processing portal The government’s “Make in India” initiative aims to increase the share of manufacturing to 25 percent of GDP by 2022 from the current 12 percent. This is expected to result in the creation of 100 million jobs. However, with little fiscal stability and no clarity on when GST will be implemented, one cannot expect large manufacturing investments to flow into India. There are still too many hindrances to conduct business in India. While the “inspector raj” is slowly being dismantled, the process must be accelerated.

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Our food processing industry has a similar allure as well. We have a vast pool of trained and skilled people as well as an unbeatable cost arbitrage opportunity.

We have a vast pool of trained and skilled people as well as an unbeatable cost arbitrage opportunity. Therefore, big food processing companies have set up offshore factories in India.

Therefore, big food processing companies have set up offshore factories in India. MNCs and global financial institutions

have also set up their back-office hubs in the country due to lower costs and easy availability of skilled labour. In some cases, an additional attraction is the considerable domestic demand that is growing. Thus, “Make in India” is a competent strategy so long as we envision it as a stepping stone in the long term. Our destination is not to become the ‘sweatshop of it. But building brands is not new to us. We also have the experience of homegrown brands like Amul successfully competing in the domestic market with multinational brands. There are corporate brands like Tata, Reliance, Mahindra, Wipro and

Cover Story

41 www.agronfoodprocessing.com Infosys, which are known globally. Therefore, along with “Make in India”, we must also pursue a strategy of ‘Made in India’ where products are made by Indian and global companies with pride in our heritage. Products that are crafted — with care and love —to perfection. ‘Made in India’ should be synonymous with great design, frugal innovation, environmentfriendliness and high quality. Food processing India The Indian food processing industry accounts for 32% of the country’s total food market. Estimated to be worth USD 121 billion, it is one of the largest industries in India, and is ranked fifth in terms of production, consumption and exports. The industry employs 13 million people directly and 35 million people indirectly. It accounts for 14% of manufacturing GDP, nearly 13% of India’s exports and 6% of total industrial investment. Currently growing at more than 10% per annum, it is expected to touch USD 194 billion by 2015. India’s food processing sector ranks fifth in the world in exports, production and

“Investment in registered food processing sector had grown by 20.1% at the end of 2012. The number of registered processing factories has increased from 35,838 in 2010-11 to 36,881 in 2011-12, marking a growth rate of 2.9%” consumption. The major parts of the food processing sector are milled grain, sugar, edible oils, beverages and dairy products. The contribution of the food processing industry to the gross domestic product at 2004-05 prices in 2012-13 amounts to INR 845.22 Billion. India’s food processing industry has grown annually at 8.4% for the last 5 years, up to 2012-13. The value addition of the food processing sector as a share of GDP manufacturing was 9.8% in 2012-13. Investment in registered food processing sector had grown by 20.1% at the end of 2012. The number of registered

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processing factories has increased from 35,838 in 2010-11 to 36,881 in 2011-12, marking a growth rate of 2.9%. The industry is also one of the largest Sanjeev Gupta, Managing Director of Kanchan Metals & President of AFTPAI has vast experience in food processing industry. He supplies machinery to almost all the major food processing companies in India. “I do not observe any announcement either in policy or direct or indirect taxation. This is surprising especially when Food processing sector is the most important, critical and a priority sector. There is still anomaly in Duties as per Tariff chart for certain machineries which was pointed out after last Budget proposals and were advised by Authorities that it will be taken care in next budget. The proposals will not give any impetus to Food processing sector. Although there are lots of positive thoughts for the Indian Industry and business in general which may also have impact in Food sector in future. However the manufacturing sector has not been touched in these proposals which are a deterrent. MAKE IN INDIA campaign should include Food Processing sector with emphasis in Capital equipments technology so that world class machineries and technology can be made in India which will reduce dependence on Imports and make investments much more affordable in processing activity which is needed . This directly helps the agricultural sector in addition to employment generation. Necessary policy support and is required for this” said Gupta.

employment creators, with growth in direct employment in the organized food processing sector standing at 6.05% between 2010-11 and 2011-12. Food is the biggest expense for an urban Indian household. About 38.6% of the total consumption expenditure of households was spent on food in 2011-12. The total household expenditure on the purchase of food items in 2012-13 was INR 11 Trillion. An average household in India spent INR 41,856 on food. Advantage India • India is one of the largest food producers in the world • India has diverse agro-climatic conditions and has a large and diverse raw material base suitable for food processing companies • India is looking for investment in infrastructure, packaging and marketing • India has huge scientific and research talent pool • Well-developed infrastructure distribution network

and

• Rapid urbanisation, increased literacy,changing life style, increased number of women in workforce, rising per capita income- leading to rapid growth and new opportunities in food and beverages sector • 7. 50 per cent of household expenditure by Indians is on food items • Strategic geographic location (proximity of India to markets in Europe and Far East, South East and West Asia). Position of India in World Production • Largest producer of milk in the world (105 million tonnes per annum) • Largest livestock population(485 million tonnes per annum) • Second largest producer of fruits & vegetables (150 million tonnes per annum)

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44 www.agronfoodprocessing.com • Third largest producer of food grain 230 million tonnes per annum) • Third largest producer of fish (7 million tonnes per annum) • 52% cultivable land compared to 11% world average • All 15 major climates in the world exist in India • 46 out of 60 soil types exist in India • 20 agri-climatic regions FDI for make in India The Government of India allows 100%

“A population of 1.2 Billion people, with the world’s highest youth population – India has 572 Million people under the age of 24. These are the groups that indulge more on processed food and beverage consumption” FDI under the automatic route in the food processing sector, in agri-products, milk and milk products, and marine and meat products Automatic approvals are provided for foreign investment and technology transfer in most cases. Units based on agri-products that are 100% exportoriented are allowed to sell up to 50% in the domestic market. There is no import duty on capital goods and raw material for 100% export-oriented units. Earnings from export activities are exempt from corporate tax. Additionally, there is 100% tax exemption for five years, followed by 25% tax exemption for the next five years, for new agro-processing industries. There is 100% FDI permitted for alcoholic beverages, with the requirement of an industrial license. While for pickles, mustard oil, groundnut oil and bread – items reserved for the micro small and medium sector, 24% foreign direct investment is allowed under the automatic route, with the requirement of prior

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approval from the Foreign Investment Promotion Board for FDI amounting to more than 24%. Growth drivers The growth drivers for the food industry that makes its presence felt internationally are numerous. The government needs to realize the prosperity of the sector and analyze what a great picture it represents for India. The Indian food processing industry is divided into agri-products, milk and milk products, and meat, poultry and marine products. In agri-products, India is the largest producer of several fruits, such as banana, mango and papaya. It is also the second-largest producer of vegetables such as brinjal, cabbage and onion. The country is also the secondlargest producer of rice, wheat, sugar and cotton. In milk and milk products, India is the largest producer, accounting for 20% of global production. In terms of livestock, the country has the largest livestock population in the world, with 98.7 million buffaloes and 176 million cows, Liberalization and the growth of organized retail have made the Indian market more attractive for global players. With a large agricultural sector, abundant livestock and cost competitiveness, India is fast emerging as a sourcing hub of processed food. A population of 1.2 Billion people, with the world’s highest youth population – India has 572 Million people under the age of 24. These are the groups that indulge more on processed food and beverage consumption. Increasing desire for branded food as well as increased spending power has made the food processing industry a vital sector.

With Make in India the government wants to take India on a high-growth trajectory of double digits, surpassing China, in a year or two Favorable economic and cultural transformation and a shift in attitudes and

Cover Story Pradeep Kataria, Managing Director of Suarabh Flexipack Systems a leading manufacturer of packaging machinery in India, said, Budget presented by the Union government is really hilarious for all of us, six percent excise duty on some machines will now be 12.5 percent. Government has not given any thoughts to the food processing industry of India. I don’t understand how Make in India initiative will benefit food processing industry when there is no support to this segment and whatever little support was there, they have taken back from us.

The overall resources going to the agri-food space are not less. They account for more than R2.5 lakh crore, between the ministries of agriculture, food, fertilizer, water resources and food processing lifestyles have consumers experimenting with different cuisine, tastes and new brands. There is an awareness and concern for wellness and health, for high protein, low-fat, wholegrain, organic food. Processed food exports and related products have been rising steadily, the main destinations being the Middle East and Southeast Asia. India is a global outsourcing hub, with large retailers sourcing from India owing to abundant raw materials, supply and cost advantages. Critical analysis Prime Minister Narendra Modi just recently in France said that we should treat “make in India as a revolution not as an investment campaign. Somehow the Prime Minister has forgotten to include

45 www.agronfoodprocessing.com one of the most important sectors as a priority in his revolution. Where is the food processing industry positioned in this uprising? I wonder! The Food Processing Industry in India has the potential to contribute to the country’s agricultural growth and employment, alleviate rural poverty, guarantee food and nutritional security and contain food inflation. Policy intervention and programs sharply focused on developing the food processing industry in India with a 10 year perspective can encourage diversification of crop pattern in agriculture and substantially reduce wastage of farm produce. It can also increase farm gate prices, add value, enhance domestic consumption and export earnings. With Make in India the government wants to take India on a high-growth trajectory of double digits, surpassing China, in a year or two. They say that it is India’s time to fly, as is also noted by The Economist. But the focus stays puts on infrastructure and industry. Other sectors don’t seem to be as central to their strategy. If India wants to compete with China on growth and poverty reduction, there is at least one lesson that it should have learnt long back. China started its reforms with agriculture and food processing,

Food processing sector was given a dud in budget; we are given step motherly treatment in the Make in India campaign as compared to other industry and attained 7.1% annual growth in GDP in the first six years, 1978-84. China also liberated its agri-prices, apart from replacing the commune system by household responsibility system. The results were dramatic: farm incomes grew by 14% per annum (due to price liberalisation), poverty halved in six years, and it gave political legitimacy to the reforms process to be carried out further and faster. India’s reforms started with stealth. It

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started with trade and industrial sector reforms (ending of the License Raj). India also halved its poverty — but in 18 years (1993-2011), not six. The food processing industry and agriculture has been limping for most of the time with a long-term growth of around 3.3%. Even food processing was never at the centre of reforms strategy. But some states like Gujarat, Madhya Pradesh and Chhattisgarh did register more than 7% growth per annum in agri-GDP during the first decade of the millennium. People of these three states rewarded the respective chief ministers by returning them to power three times! No one understands this better than the Prime Minister himself, who has lived with this and benefited from this strategy tremendously. It also helped reduce rural poverty quite fast. Then why is the food industry and agriculture not a central part of this reformist Budget of the Modi government? If India’s overall GDP is growing at 7.5%, and if food industry and agriculture is limping at 1.1% in FY15, should it not be a cause for worry? The govt. has admitted this is a challenge as agriculture is under stress; but where is then the big dose of reforms for agriculture and food processing sector? The overall resources going to the agrifood space are not less. They account for more than R2.5 lakh crore, between the ministries of agriculture, food, fertilizer, water resources and food processing. But it is a pity that more than 80% of these resources go as subsidies on food and fertilizers, with much lower rates of return in terms of agri-growth or poverty alleviation. This was the time to bite the bullet, and rationalize subsidies and boost investments in food processing and agriculture, which would have created jobs, raised productivity and farm incomes in a sustainable manner and reduced rural poverty, making it a win-win situation politically and economically. But this Budget stops much short of that and, I am afraid, food industry will keep limping, and farmers will be at the receiving end. This huge portal of food processing at the site of ‘’Make in India’’ is just a spectacleof mendacities. Astonishingly

Cover Story the food processing industry was given a total miss in this yearbudget and the only tit bit thrown to this sector was the exemption from service tax to certain pre-cold storage services for fruits and vegetables. Also what do we do with this portal if there is no actual road map for the food processing industry in this campaign? Food processing sector was given a dud in budget; we are given step motherly treatment in the Make in India campaign as compared to other industry. Food processing industry is of enormous significance for India's development because of the vital linkages and synergies that it promotes between the two pillars of our economy, industry and agriculture. Fast growth in the food processing sector and progressive improvement in the value addition chain are also of great importance for achieving favorable terms of trade for Indian agriculture both in the domestic and international markets. Even more important is the crucial contribution that an efficient food processing industry could make in the nation's food security. The simple fact that the post-harvest losses are about 25 to 30 per cent in our country should serve as an eye opener for all of us. Even marginal reductions in these losses are bound to give us great relief on the food security front as well as improve the income levels of the farmers. In this context that the Government of India has not given utmost priority in developing the food processing sector via Make in India campaign. It is very important that the government utilize the advantages it can get via the food processing sector as it will not only enhance the country’s GDP but create jobs, give food security and eradicate poverty. Food processing and agriculture are the back bone of India and to make it a world power we need to develop these sectors on priority basis. Dear government, make this food processing and agriculture portal on your Make in India site a reality and empower our nation with food security and safety.

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Interview

Processed dairy products will have bigger growth than processed milk next 5-6 years. We need to continuously increase milk production and it has to be sustainable. Processed dairy products will have bigger growth than processed milk as a liquid after about 5-6 years.

Dr. Parekh discussing joint venture during Interpack Exhibition

Dr J V Parekh is Indiaâ&#x20AC;&#x2122;s most renowned dairy industry consultants with 100s of dairy projects in his entire carrier he needs no introduction. Recently our Editor Firoz H Naqvi had a detailed discussion with Dr Parekh, following are the excerpts of the same. What are the services you are dealing with; please brief us about your business? We are a leading Dairy Consultant in India. We have more than 30 years experience in planning, formulation and execution of the Dairy Projects in India and abroad. We provide turnkey consultancy services from concept to commissioning of the project, which includes technical inputs like preparation of detailed Project Report, Building and Machinery Layouts, Technical Know-how, formulation, quality control, packaging, recruitment of manpower, training etc. We are based in Mumbai, Business Capital of India. How do you look at the Indian dairy industry and its growth in the last 5 years? In 2012-13, we produced about 132 million tones of milk. Last fiscal, we had an output of 138 million tones. The output is expected to grow at this rate, which implies adding 6 million tones of extra milk production annually. The reason is that the demand for dairy products would continue to increase in

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Though India is the largest producer of milk but the growth of production of milk is still shorter than the

population rate of growth and demand, what needs to be done to become a surplus milk producing country? One of the key focus areas is improvement in the genetic potential of animals. The NDDB intend to do it by a combination of factors â&#x20AC;&#x201C; focusing on high genetic merit indigenous cattle, production of high genetic merit bulls, improving artificial insemination etc. The major portion of intervention will be on good indigenous breeds; also the need to get exotic breeds from outside, from certain specific areas. I do not see the possibility of import of milk in the near future.

linked to modem for on line data capturing with centralized management of database. There is also trend for use of sexed semen for artificial insemination in few countries however due to its exorbitant import cost, in India it may take some time till technology is locally available. During last 50 years we have seen good development in separation, homogenisation and powder manufacturing technologies which have made lots of advancement mainly in terms of high speed processing and automation. The latest trend in milk processing during past decade is totally on different lines mainly focussing on high capacities and more energy efficiency. There has been noticeble development in filtration technology e.g. reverse osmosis, nano fitration, ultra filtration etc. These development have resulted into new ways to concentrate the milk before drying and also handling whey to produce more valuable proteins which are in great demand from the cosumers. We have to keep watch on development of cold concentration technology which may be much benefical to Indian dairy processors in terms of long distance transporation and energy savings in manufacturing of milk powders. In view of growing demand of cheese and paneer, it is prudent to experiment these technological development to get best out of whey protein derivatives with high end

Technologically where do we stand if we compare it with the developed countries? The recent development in Indian context is to establish bulk milk coolers (BMC) by both private and cooperative sectors. There has been huge numbers of BMCs being set up all across which shall certainly improve the quality of milk, elimination of sourage of milk and in turn ensuring better rates for the farmers. Dr. Parekh inspecting Filling Machine during Interpack Exhibition final products. Today these equipments have also been

Interview

47 www.agronfoodprocessing.com of these products. Supply chain management has been a critical area for Indian milk processing companies, what is the best solution to manage it even in the remotest areas? The main problems resolve around the supply chain and the cold chain infrastructure in the country. Starting from milk procurement, processing, packaging and Shree Devendrabhai Shah welcoming Dr. Parekh and Mr. Herve Lanoe at Parag Dairy.

There is also good develpoment in ultraheat treatment processing with economical packaging material to reduce the overall cost. In India, such processing facilities are being set up by both Cooperative and Private sector. There has been rapid growth in development of sports drinks out of milk protein derived out of whey. This is one of the fastest growing segments in few countries. In India, this requirement is mainly catered by imported whey protein concentrates in powder form however such products have good future in Indian market. Whey protein based sports drinks designed for immediate recovery after intensive work out have been gathering large consumer base. Another area of product innovation is to position milk in snack categories which has led to development of lots of varieties of cheese sauces, dips and beverages mainly flavoured milk, coffee and chocolate based milk. Packaging plays an imminent role in dairy products due to shelf life and preservation of freshness. There has been development of HDPE bottles for packing UHT milk which are cost economical and more environment friendly due to good recyclability. Modified Atmospheric Packaging (MAP) is becoming more relevant for increased shelf life and preservation of freshness of milk produts. In India, MAP should play more important role due to hostile ambient conditions and more logistics and distribution time. Products like Paneer, Khoa and Indigenous sweets have great opportunities if MAP is used for packaing

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marketing of milk and milk products have to be transported through cold chain. In order to start operation in a particular city, it becomes necessary to appoint a distributor somewhere in the vicinity and that distributor with his infrasturcture of cold room, transporation, manpower needs a certain threshold of sales to break even. The main issue is to reach milk products to end point on time. It is a big issue because of the logistics related bottlenecks when it comes to transporting the products from manufacturing unit to the consumer. Private Equity Funds have been talk of the town in recent years in Indian food processing industry and successful, do you think dairy industry is mature enough for this type of investments? The National Dairy Development Board (NDDB) has prepared a National Dairy Plan which aims at meeting the projected demand of about 180 million tonnes of milk by 2021-22. With an estimated outlay of about Rs.17,371 crore, the Plan has three major components --enhancing milk production through increased productivity; substantially strengthening / expanding the infrastruture for procurement, processing, marketing and quality assurance through existing institutional structures and by promoting new ones; and human resource development. The share of the organised sector has meanwhile doubled – from 15 per cent a decade back to around 30 per cent now. This is seen as an encouraging sign, with most big players assuring quality checks

at mulitple points. The fast expanding private sector investment and entry of global players is also intensifying competition. In the last 5 years, USD 150 mn has been invested by private equity investors in the Indian Dairy Industry, of which USD 125 mn has come in the last 18 months. The capital raised has largely been invested in backward and forward integration of the private dairy companies. Private equity investors are encouraging Indian companies to move up the value chain. There is a big Business Prospects and Investment Opportunities in the Dairy Industry in India. Growth/demand of milk products other than milk has also been on higher side in India, do you see it as a good venture for value addition in the Industry? India is witnessing winds of change because of improved milk availability, a change –over to market economy, globalization, and the entry of the private sector in the dairy industry. The value addition and veriety in the availability of milk products are on everybody’s agenda. There is an increasing demand for new products and processes. The main reasons are – an increase in disposable incomes; changes in consumer concerns and perceiptions on nutritional quality and safety; arrival of foreign brands; increasing popularity of satellite/ cable media; and availability of new technologies and functional ingredients. From conventional milk products like paneer and cheese, the market has evolved over time and now caters to the wellness market as well with its sugar free and probiotic milk products. High margin dairy products like yogurt, ice cream and cheese constitute only 8% of the Indian dairy market currently; expected to grow at CAGR 25% over next 5 years. Moreover, with rise in disposable income and educational level, the awarness for nutrition and health improves which in turn raises the demand for health and nutritional products.

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NEWS

17 Mega Food Parks to be set up by govt next week

he government is likely to soon announce allocation of 17 mega food parks, entailing a total investment of Rs 2,100 crore, to various firms for development. A mega food park provides various facilities to food processors, farmers, retailers and exporters, helping achieve faster growth of food processing industries. According to sources, Food Processing Minister Harsimrat Kaur Badal is likely to announce next week the sanctioning of these 17 mega food parks in states including Punjab, Haryana, Andhra Pradesh, Karnataka, Kerala, Telangana, Odisha, Gujarat, Maharashtra, Madhya Pradesh, Tamil Nadu and Bihar. The total investment in these mega food parks is estimated at Rs 2,100 crore, of which the government’s contribution would be to the tune of Rs 850 crore, they added. In these mega food parks, 50,000 people are expected to get employment while 80,000 farmers would also be benefitted.

Under the scheme (2008-09) of mega food parks, the Food Processing Ministry had sanctioned 42 projects throughout the country. Of these, 25 parks have already been allocated.

72 proposals from various firms including Adani Group, ITC and Future Group for 17 food parks. These mega food parks will attract a minimum investment of about Rs 125 crore each. Badal had further said only 2 per cent of total fruits; vegetables and grains produced in the country are processed.

“…We have received proposals for allocations of food parks, we are in the process of evaluating those proposals and I think very soon we would be able to allocate these food parks,” Badal had said earlier this month. The Minister had also said that it would be ensured that at least one Mega Food Park is established in every state. The Food Processing Ministry has received

The Mega Food Park Scheme, based on cluster approach, is modeled on hub and spoke architecture. It aims at facilitating the establishment of a strong food processing industry backed by an efficient supply chain, which includes collection centres, central processing center (CPC) and cold chain infrastructure. The scheme envisages one time capital grant of 50 per cent of the project cost (excluding land cost) subject to a maximum of Rs 50 crore in general areas and 75 per cent of the project cost (excluding land cost) subject to a ceiling of Rs 50 crore, in difficult and hilly areas including north east region and J&K.

Five star chicken will spend Rs 3,100-cr in expansion

PF (Charoen Pokphand Foods) which operates the Five Star Chicken small-format quickserve retail chain, that is taking on US multinationals like KFC and McDonald's, has drawn up an aggressive expansion plan for India that includes investment of $500 million (Rs 3,100 crore). CP Foods, a part of the diversified CP Group, that is Thailand's largest private enterprise with annual sales of over $45 billion, is especially bullish about the Indian processed and packaged food industry. It expects the company's food business, which now contributes 5% to revenue, to grow three-fold in the next

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five years.http://articles.economictimes. indiatimes.com/images/pixel.gif "We are planning to double the number of our 'Five Star Chicken' stores in the next five years and plan to enter the packaged food business here in the next year or so," Sanjeev Pant, senior vice-president for the food business told. The investment of $500 million will go towards expanding all three units: shrimp, poultry and food. CP Foods in India has 260 Five Star Chicken stores in Bengaluru, Chennai, Coimbatore, Mysuru, Kochi, Salem, Kozhikode, Goa and Hyderabad. The company's revenue was $600 million (Rs

3,720 crore) last year and is growing at 10-15% annually, he said. The shrimp seg ment contributes 50% to revenue, poultry feed and farming 45%, and the newlylaunched food business the rest. "The booming online business in India would also provide us enough room to grow faster. We are now talking to a few online food delivery players who can support us to take our products online", Pant said. The company has been following a low-cost operating model for its small-format quick-service restaurants by keeping the store area at 100-200 sq ft.

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NEWS

The Food Corporation of India sees a fall of 10% in Wheat procurement

he Food Corporation of India sees a fall of 10% in wheat procurement, owing to unseasonal rains in March. This year, the FCI and other government agencies are set to procure 30 million tonne for various government schemes from April 1.

of wheat was procured, reports of grains damage due to discolourisation emerged. The 2015-16 wheat marketing year usually begins from Match 18 in Madhya Pradesh and from April 1 across

Wheat procurement in Punjab and Haryana will fall by over 1 million tonne compared to the initial target of 12 and 7 million tonne,” said the official. Wheat crop damage area in Punjab has been 0.3 mHa and in Haryana, 1.75 mHa.

With the Haryana government set to procure grain on its own, the corporation’s share in wheat procurement could fall further.From 18.86% share in 2009-10 wheat procurement seasons, the FCI’s share has come down to 12.61% in 2014-15. “Wheat procurement will fall by 10% this season due to unseasonal rains. The Madhya Pradesh government has not been able to start wheat procurement due to rains and we expect delay and loss in production across other states too,” said an official from the FCI. He added in Gujarat, where only 50 tonne

February 28 to March 16 across north, northwest and central India. As per the preliminary estimates of the agriculture ministry, wheat crop on 12.1 mHa has seen the maximum damage.

Punjab, Haryana and other states. The procurement exercise generally gets over by June. According to the official, wheat crop has been flattened and discolored at some places due to unseasonal rains since

However, in Uttar Pradesh – where wheat area under 7.5 mHa witnessed the maximum damage – procurement could increase to 3 mHa compared to 0.6 mHa. The entire procurement in the state will be carried by the state government agencies, said FCI officials. Officials in food ministry and FCI said it was unlikely for private players and even states to procure grains in eastern states

Farm-level Solar Power generation scheme” for farmers in Punjab

grarian state Punjab’s hardworking farmers could look forward to the end of some of their power-cut woes with the state government planning to launch soon a “New and Renewable Energy Minister Bikram Singh Majithia said farmers will be allowed to set up solar power plants ranging from one MW to 2.5 MW.”The initial target is being fixed at generation of 500 MW power under this scheme. Majithia said the scheme had been specially designed to meet the growing challenges of land scarcity, high cost of land, alarming ground water table situation and depleting soil health. “There was no doubt that agricultural production in state has reached a saturation point and it is imperative for

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us to explore more and more avenues for enhancing the income of farm sector. The time has come to develop entrepreneurial

skills among farmers which will further give them confidence for setting up of

agro-industries/food processing industries etc,” Majithia said. Punjab, with just 1.54 percent of the country’s geographical area, contributes over 50 percent of food grains (wheat and paddy) to the central kitty. “Once the scheme is launched, any land owning farmer having at least five acres of land or small farmers joining hands to form a group can apply jointly,” he said. The minister further said that farmers would be free to fix their solar panels in such a design that they could use their land for agricultural purposes also. “The farmers can also use power for their domestic or agricultural requirements and they will be paid on monthly basis for the power they contribute to the power substation,” he said

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Parag Milk Foods is planning to expand its brand to Delhi and Bengaluru

aharashtrabased private dairy player Parag Milk Foods, which has been experimenting with the concept closer home, is planning to expand this premium and ‘by invitation only’ brand to Delhi and Bengaluru by

2016. Milklovers in Delhi and Bengaluru, too, can now enjoy a glass of morning milk fresh from the farm milked from a premium breed of ‘happy’ Holstein cows. Parag Milk Foods’ premium brand Pride of Cows costs Rs 80 a litre – nearly double the price of standard milk available in the market – and is currently delivered to the homes of Mumbai’s elite including Sachin Tendulkar, Hrithik Roshan, Nita Ambani, Amitabh Bachchan, Farhan Akhtar, and Kiran Rao. Not everyone can have access to the Pride of Cows milk; a new customer comes through the reference from an existing one. Fresh milk is delivered to the client’s

doorstep directly from Parag Milk’s Bhagyalaxmi Dairy Farm near Pune. The company will enter Delhi and Bengaluru in 2016. There are also plans to come up with brand extensions such as breakfast milk for kids, an energy-based milk containing a mix of fresh fruits. So far, the company has invested Rs 150 crore in the project and aims to break even by next year. The cost of setting up the farm alone, which has now become a major site for dairy tourism attracting 1,000-1,200 visitors every month (school children and celebrities), was Rs 70-100 crore. Mahesh Israni, chief marketing officer, Parag Milk Foods, says: “The brand has been conceived at an exclusive level of marketing and a new customer comes through reference from an existing customer. One can also register through the website, but our executive visits the prospective client’s house and explains the product thoroughly. We want to forge a long-term bond with our clients.” The company currently has a consumer base of 16,000-18,000 in Mumbai and Pune and at any given time, there are around 12,000 active customers.

According to Israni, the dairy farm functions around the concept that ‘happy’ cows give better quality milk. Thus, special care is taken to keep the breed of 4,000 Dutch Holstein cows happy and in the best of health. “The cows are pampered with music, specially designed nutritional meals, and showers when the temperatures soar above a certain comfort level for these milch animals,” says Israni, adding the animals are free to roam about across the farm and there milking is never forced. Parag claims there is no human interface from the time the milk is collected from the cows at a rotary parlor till the time it reaches the consumer. Expansion to other cities is thus only possible when the company comes up with dedicated farms nearby the cities they plan to enter. One Holstein cow costs Rs 1.75-2 lakh, compared with Rs 80,000-90,000 for an Indian cow. At the moment, the contribution of Pride of Cows brand to the overall turnover of Parag, which sells milk and milk products under the Gowardhan and Go brands, is negligible. Israni says the idea is primarily a brand-building exercise, aimed at promoting unadulterated milk fresh from the farm to home.

To develop 72 Dairy Units in Nawanshahr Rs 3.8 cr loans sanctioned

ith a view to boosting dairy farming in the district, subsidized loans amounting to Rs 3.8 crore have been disbursed for setting up 72 new dairy units this fiscal. Deputy commissioner Ravinder Singh said the target of setting up new dairy units in the current financial year has been set at 83, out of which 72 have already been set up.

and 33 per cent to female and Scheduled Caste (SC) beneficiaries was given. He said that there are two schemes under which dairy loans are sanctioned, adding that one scheme is of NABARD, in which a dairy farmer is given a loan up to Rs 5 lakh for a maximum of 10 milch cattle and other by the state dairy department, in which a subsidy amount of `12,500 is given per animal.

He said under various dairy schemes, a subsidy of 25 per cent to general category

He further said seven female beneficiaries were selected under women empowerment

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category, a special scheme to boost dairy profession amongst women. Under this, a total of `133.40 lakh had been given to three beneficiaries so far, he said. A subsidy of 50 per cent has been provided to all beneficiaries under the scheme, he added. Besides, 15-day training was imparted to the unemployed youth, who want to opt for dairy farming, he informed.

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NEWS

Global Dairy Processing Equipment Market 2015-2019

he global dairy processing equipment market is projected to reach $10,433.3 million by 2019, at a CAGR of 5.3% from 2014 to 2019. New technological developments and increase in consumption and demand for dairy foods have led to the growth of the dairy processing equipment market.

Milk is processed by utilizing dairy processing equipment to develop dairy products, such as processed milk, cream, cheese, milk powder, and protein concentrates. The key dairy processing equipment utilized include pasteurizers, homogenizers, separators, evaporators & dryers, membrane filters & other equipment, such as churning equipment, crystallizers and cheese vats. Dairy processing equipment helps increase output and prolongs shelf-life of dairy products so that they are delivered to the end consumers in the best possible quality.

Asia-Pacific is the largest market for dairy processing equipment, followed by Europe&North America. The dairy processing equipment market is matured in North America and Europe, while China and India are the fastest-growing

markets in the Asia-Pacific region. Both, bottom-up and top-down approaches were used to derive the size of

the dairy processing equipment market. The market segments include types of equipment, applications, and region. Key players such as Tetra Laval (Switzerland), Alfa Laval (Sweden), SPX Corporation (U.S.), GEA Group (Germany), and Krones Group (Germany), have been profiled in the report. The market dynamicsin terms of market drivers, restraints, opportunities, and challenges-have been discussed in detail in the report. All the growth parameters in individual segments have been considered in this report. Evaporators & dryers and membrane filters are projected to grow in future as protein concentrates and milk powders are processed through these equipment wherein these products are increasingly being used by dairy processors to introduce new innovative dairy products in order to meet the consumer demand.

NZ’s Fonterra buys stake in China’s Beingmate for $553mn

ew Zealand’s Fonterra Cooperative Group Ltd said it paid $553 million for a near 20 per cent stake in China’s Beingmate Baby and Child Food Co Ltd, as it looks to boost its presence in the country’s branded dairy industry. China is a crucial market for Fonterra, importing about a quarter of New Zealand’s total dairy exports to feed growing demand for milk products, particularly formula, from the country’s booming middle class. Fonterra said it paid 18 yuan per share for 192 million shares in the Chinese baby food and infant formula maker, giving it an 18.8 per cent stake in the company, short of a target of 20 percent announced in August.

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“We are extremely satisfied and confident that the partnership can and should proceed on the basis of the 18.8 percent stake,” Fonterra chief financial officer Lukas Paravicini said. Fonterra was not immediately available for further comment, but analysts said the smaller stake may have been due to a fall in the New Zealand dollar since the offer was announced. The price per share was in line with initial plans, but the total price tag of around NZ$752 million was 22 per cent higher than initially forecast, reflecting the weaker currency. The price per share represented a 1.7 per cent premium to Beingmate’s trading price of 17.68 yuan per share on Monday, and was at the top end of its one-year

average around 12-18 yuan. Fonterra was paying a high price to raise its presence in China’s branded infant formula market, valued at around $18 billion in 2014 by Euromonitor, given that many multinationals are investing heavily and demand expectations are easing, said Forsyth Barr analyst James Bascand. The New Zealand company, the world’s largest dairy exporter by volume, has already lowered its forecast for Chinese dairy demand, anticipating consumption to increase 4 per cent a year through 2020, from an earlier forecast of 7 per cent. Fonterra’s sharetrading fund was little changed after the announcement, after rising around 1 percent to NZ$5.90 in earlier trade.

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Mother Dairy to sell lassi via vending machines

n the lines Pepsi and Coke, Mother Dairy has started serving fresh lassi through vending machines before the summer season to make inroads into the soft drinks market. The move, earlier deemed impossible by dairy makers due to the complexities involved in setting up a cold chain, might encourage other companies to follow suit. Subhashis Basu, dairy head with Mother Dairy, said it took the Delhi-based company two years to come up with the solution. Basu, an ex-PepsiCo employee, was inspired by the way Fountain Pepsi revolutionized the soft drink market here. Even now, Coca-Cola is finding out new ways to penetrate the market with its mobile units, which are basically trucks moving around with soft drink-vending machines. "For the first time in India, we have used the 'bag-in-box model', which allows us to deliver fresh lassi straight from the plant

to the vending machines. We have set up 50 machines in colleges and corporate offices such as those of Vodafone's. We will be setting up 250 more before summer," Basu said. A bag-in-box model is a flexible packaging format used in developed markets for transporting highly sensitive beverages such as, smoothies and milkshakes. The bag with the beverage, which resides within a cardboard box, can be fitted into a specialized vending machine. "Our bag has numerous nozzles that allow us to serve different flavours

of lassi. The first few vending machines have been imported but the rest will be manufactured here," said Basu. Flavoured milk, lassi and butter milk are the main product segments under dairy beverages. Total packed dairy beverages amount to 527 million litres and are growing at a CAGR of 18%, according to industry estimates. Of the total packaged beverages, 60% is accounted for by lassi and buttermilk. "Consumers, especially youngsters, are moving away from sugary drinks to more healthy beverages. Dairy beverages such as buttermilk, flavoured milk and lassi, among others, are gaining traction very rapidly among the youth," said R S Sodhi, MD of Gujarat Cooperative Milk Marketing Federation, the maker of Amul milk and butter.

Prabhat Dairy to raise Rs 500-600 Cr by selling shares

rabhat Dairy Pvt. Ltd is looking to raise Rs.500-600 crore by selling shares to the public, two people familiar with the issue said. The firm has already hired a domestic investment bank for the initial public offering (IPO) and is looking to hire more bankers, the first of the two people mentioned above said. The firm, which sells Milk Magic condensed milk, Flava flavoured milk and All Rounder skimmed milk powder, is backed by India Agribusiness Fund (IAF), which is sponsored by Rabobank Group. “Prabhat is looking to raise anywhere between Rs.500-600 crore through the IPO, and existing private equity investors are looking at exiting partly,” said the second person, adding the firm has not yet decided when to file IPO papers with the market regulator.

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A Prabhat Dairy spokesperson said the firm is exploring options to meet business needs. “Investment bankers are exploring alternative fund-raising options

so as to put forth the same to the board of directors. Only the board of directors can take any decision,” the spokesperson said in an email response, adding the

firm sees growth opportunities in making value-added products. The firm initially raised Rs.140 crore from IAF and French development finance institution Proparco in August 2013. Of this, IAF had brought in Rs.80 crore. Rabo Equity Advisors and Proparco did not respond to a questionnaire sent via email. Started in 1998 by Sarangdhar Nirmal, the firm makes ghee, flavoured milk, sweetened condensed milk and skimmed milk powder, apart from packaged milk. Its manufacturing facility is at Srirampur in Maharashtra. The firm reported a net profit of Rs.52.7 crore in fiscal 2014, compared with a profit of Rs.29.2 crore in the previous year, according to documents available with the Registrar of Companies.

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Dairy sector expected to grow by 15.6% in FY16: Report

hile domestic milk prices have remained firm during FY15, the demand for milk and milk products have remained high. Analysts expect, India's dairy sector to clock a 15.6 per cent growth rate during FY16.

milk has an impact on industry's margins. As dairy cooperatives, unlike their private counterparts, continue to procure milk from farmers at the regulated prices even during the flush season, their margins are

Rating and research firm India Ratings & Research said that demand for dairy products have remained high owing to changing dietary habits and rising buying power. India Ratings expects GDP to grow at 6.5 per cent and agriculture at 2 per cent in FY16. "Domestic prices have remained firm in FY15 despite the collapse of global milk and dairy product prices in 2014. The demand for milk and milk-based products remained high due to changing dietary habits and rising buying power. The dairy sector grew 12.6 per cent year-on-year (yoy) in FY13 and India Ratings expects it to grow at 15.6 per cent in FY16," the report adds. The report goes on to explain further that seasonal variation in the production of

from the federal government's increased focus on dairy development, enhanced availability of quality fodder, and promotion of bovine breeding, among other aspects of raising milch productivity. The government is also working on ensuring better transportation and storage options for milk and milk products." Despite being the world's largest milk producer, India is not a significant player in the global dairy market. India's dairy exports have remained sluggish lately due to a drop in international dairy prices, sluggish global demand, rising cost of domestic milk production and the abolition of skimmed milk powder export incentives by the government in July 2014.

affected more than private players. In fact, cooperatives also procure the excess milk available in the market at regulated prices. It adds, "The sector will reap benefits

The research firm feels that "Although FY16 is likely to open up new export markets for India in view of Russia not planning to give up on its import embargo on dairy products from Europe, the share of dairy exports in India's total exports will remain low."

Amul reports slowest growth in 8 years

ujarat Cooperative Milk Marketing Federation ended the fiscal with revenue ofRs 20,730 crore, an increase of 14.2% over the previous year while it achieved a compounded growth rate of 20% over the past five years in marketing its Amul brand of milk and milk products. The consumer product line has grown by 21% especially in the beverages, small milk powder pouches and icecream," Amul's managing director RS Sodhi said. He added, though, that the company suffered a 77% drop in revenue in sale of bulk commodities. The total turnover of the Amul group, owned by close to 32 lakh farmers from 17 district cooperatives, including sale of liquid milk

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by member unions, other dairy products and cattle feed in their respective districts, is estimated at almost Rs 29,000 crore, Sodhi said. The cooperative dairy, which processes 154 lakh litres of milk procured from Gujarat and other states daily, is focusing on expanding its plant capacity by 14% to process 175 lakh litres of milk per day. "With the current expansion in setting greenfield projects and expanding existing units, we should achieve a turnover of Rs 25,000 crore (for Amul brand) in 201516," said Sodhi. The dairy cooperative is expanding the market for liquid milk under the Amul brand in new markets while it is pushing the sales of valueadded products to earn higher margins.

To expand its export market, which slumped by 53% to Rs 250 crore in 2014-15, Amul plans to focus on the SAARC and Middle East countries? "Pakistan, Afghanistan, Middle East are good markets to expand. Apart from bulk commodities, branded Amul products are also in demand in these markets," said Sodhi. In the domestic market the dairy plans to add 1,000 retail outlets during the current fiscal year, taking the total number of exclusive parlours across the country to 9,000. In addition, to expand the distribution network, it will add 900 wholesale distributors this year to the existing 4,800.

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Nestle delving into solutions for autism via nutrition

At the Consumer Analyst Group of Europe conference in London earlier this week, Luis Cantarell, head of Zone EMENA at Nestle, spoke out about the link between nutrition and addressing health issues. A cure for autism currently is unknown.

Cantarell focused in particular on autism, which he said, attributing evidence, has been linked to intestinal disorders. “There is a clear relationship between microbiota (also known as gut flora), and what we could deliver with probiotics, and autism,” he said, according to Food Business News. “Now, we need to prove that.”

dealt with the establishment of Nestle Health Science, for which he said that autism may be “a possible target for new product development for the company. Nestlé’s employees in Ireland are also taking part in a similar initiative by

A major part of Cantarell’s presentation

partnering with Irish Autism Action “due to their compelling story of the practical support they provide, both in and out of the home, to families who are impacted by autism,” said Deirdre O’Donoghue, country manager, Nestle Ireland. Nestle’s focus on nutrition doesn’t end with autism. Its efforts for establishing children’s nutritional products have been recognized, as covered in the company’s annual report released earlier this week. The company was ranked in the top 3 for the current Access to Nutrition Index, and 98% of Nestlé’s children’s products reached the entirety of the Nestlé Nutritional Foundation criteria for the year.

Kraft recalls 242,000 Macaroni & Cheese boxes owing to metal contamination

raft Food Group has announced a voluntary recall of around 242,000 cases of the 7.25oz original flavor Kraft Macaroni & Cheese Dinner, due to the possible presence of small pieces of metal.

“The company had shipped the product to customers across the US – though no injuries have been reported.” The company said in a statement that it

The company has recalled the products with ‘best when used by’ dates of September 18 2015, through to October 11 2015, and with the code ‘C2′ directly below the date on each individual box. ‘C2′ stands for the production line on which the affected products were manufactured. Some of the recalled products had also been sold in three, four and five-pack boxes. The company had shipped the product to customers across the US, along with Puerto Rico and some Caribbean and South American countries. The products were not shipped to Canada.

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had received eight consumer contacts about the product from the impacted line within the range of code dates. However

no injuries have been reported. Kraft spokeswoman Joyce Hodel said in a statement: “We believe a piece of stainless steel got wedged in a metal piece of equipment, which may have generated friction that resulted in small pieces of metal potentially falling into the product. “We deeply apologize to the consumers we have disappointed.” This comes less than four years after a similar incident in September 2011, when the company had to recall close to 137,000 cases of Velveeta Shells & Cheese single-serve cups due to the possible presence of small, thin wire bristle pieces, reported Reuters.

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Exclusive Interview

Dairy industry

is one of the fastest rowing segments in India Prabhat Dairy Limited is an integrated milk and dairy products company in India catering to institutional as well as retail customers. It produces fresh, dry, frozen, cultured and fermented dairy products, including pasteurized milk, flavoured milk, sweetened condensed milk, ultra-pasteurised or ultra-high temperature (UHT) milk, yoghurt, dairy whitener, clarified butter (ghee), milk powder, ingredients for baby foods, lassi and chaas. We sell our products under our retail consumer brands as well as ingredient products or as comanufactured products to a number of institutional and multinational companies. An interview with Vivek Nirmal, Managing Director of Prabhat Dairy Limited is as follows:

Vivek Nirmal,

hat are the services/products you are dealing with; please brief us about your business?

Established in 1998, Prabhat Dairy Ltd is an integrated milk and dairy products company in India catering to institutional as well as retail customers. We produce fresh, dry, frozen, cultured and fermented dairy products, including pasteurized milk, flavoured milk, sweetened condensed milk, ultra-pasteurised or ultra-high temperature (UHT) milk, yoghurt, dairy whitener, clarified butter (ghee), milk powder, ingredients for baby foods, lassi and chaas. We sell our products under our retail consumer brands as well as ingredient products or as co-manufactured products to a number of institutional and

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multinational companies. Our integrated business model encompasses almost all aspects of the dairy industry value chain, including cattle feed supply, engaging with farmers on cattle health and milk production, procurement of raw milk, and the production, supply and sale of a range of processed milk and dairy products. We believe that our integrated business model enables us to leverage the dairy industry value chain, ensure efficiency in costs and operating margins and exercise more control over the production process resulting in quality products. We produce a range of milk and dairy products including milk-based specialty ingredient products and comanufactured products for institutional and multinational companies. Our specialty ingredient products are used in the production of other milk and food products by our institutional customers, while co-manufactured products are those products which are sold by our institutional customers under their own brands. Specialty Ingredient Products: Our specialty ingredient products include nutrition supplements and formulations for baby food, sweetened condensed milk, partially skimmed milk, skimmed milk powder, skimmed milk preparations, full

cream milk powder and speciality milk powder for various reputed consumer product companies. Co-manufactured Products: Our comanufactured products include UHT milk, specialty milk powders, curd (dahi), clarified butter (ghee), flavoured milk, dairy whiteners, yogurts, processed and concentrated milk, and ice creams for various institutional customers. Retail Consumer Products: Our retail consumer products include pasteurized milk, UHT milk, flavoured milk, sweetened condensed milk, dairy whitener, milk powder, lassi, curd (dahi), chaas and clarified butter (ghee) sold under the Prabhat, Flava and Milk Magic brands. Over the years, we have developed a large distribution network to market and distribute our retail consumer products across India. How do you look at the Indian dairy industry and its growth in the last 5 years? India is among the fastest growing dairy markets in the world and has become the largest global producer of milk, since fiscal 2013. Domestic milk production grew at 4.3% CAGR, to nearly 134 billion litres in fiscal 2014, from 113 billion litres in fiscal 2010. The growth in milk

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Exclusive Interview in the milk-processing sector. Despite breakthroughs in milk production, increase in crossbreeds and high-yielding livestock species, productivity of milch animals is quite low in India. This low productivity could be the result of many factors which include: poor genetic makeup of animals, shortage of feed and fodder, inadequate animal health care coverage, inappropriate dairy development policies, lack of market integration between producers and consumers, and lack of appropriate environment.

production in India outpaced other large milk producing nations such as United States of America and China, which grew at 2-3% CAGR in the past five years. Milk production is growing at a rate of 4.3% while consumption is growing at 5% leaving a gap between demand and supply. According to the Annual Report of National Dairy Development Board for fiscal 2014, India continued to be the largest milk producing nation in the world in fiscal 2014. The estimated per capita availability of milk increased to 302 grams per day which is more than the world average of 294 grams per day. Additionally, the per capita availability of milk in developed countries was estimated at 831 grams per day and in Asia it was estimated at 186 grams per day. The dairy cooperatives procured about 12.5 million tonnes of milk in fiscal 2014 as compared to 12.2 million tonnes in fiscal 2013, registering a growth of 2.5%. Liquid milk marketing by the cooperatives stood at 11 million tonnes in fiscal 2014 as compared to 10.4 million tonnes in fiscal 2013, registering an increase of about 5.8%. According to recent OECD-FAO Agricultural Outlook, the demand for milk and its products in Asia will reach almost 320 MT by 2021. Technologically where do we stand if we compare it with the developed

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countries? Indiaâ&#x20AC;&#x2122;s production of milk has strongly increased over time with significant technical, policy and institutional support. This led to significant changes in the Indian dairy sector. In fact, the Indian dairy sector has undergone significant structural changes over time and some interesting patterns are unfolding along the milk value chain. Noteworthy among them are the changes in production of milk, composition of the livestock population (increase in the crossbred population), marketing of liquid milk pioneered by cooperative networks and increase in participation of private players

Producer prices of milk are lower in India than in the leading international exporting countries. Prospects for export of milk to neighbouring, particularly SAARC, countries, most of which are deficient in meeting their requirements with domestic production, are very promising. The status of supporting infrastructures and their delivery is still inadequate and concerted efforts are required to bring desired improvement. The strengthening of market linkages, either through expansion of cooperatives or by facilitating contract farming arrangements, would go a long way to ensuring sustainable growth of the Indian dairy sector. Though India is the largest producer of milk but the growth of production of milk is still shorter than the population

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Exclusive Interview

rate of growth and demand, what needs to be done to become a surplus milk producing country? As I said, Milk production is growing at a rate of 4.3% while consumption is growing at 5% leaving a gap between demand and supply. The Union Government has started a central scheme, National Dairy Plan – Phase 1, for the period starting from fiscal 2012 to fiscal 2017. The main objective of the scheme is to provide rural milk producers with greater access to the organized milk-processing sector and to bridge the gap between the demand and supply of milk in the country. The other issue is the lack of education among the Farmers. To overcome this companies adopt backward integration strategy to ensure uninterrupted supply of consistent quality milk through educating farmers, providing veterinary services, quality cattle feed, etc. Thus, the fully integrated player like Prabhat Dairy Ltd that provides entire value chain have a strategic procurement advantage, thereby providing a competitive edge in the overall market. Private Equity Funds have been talk of the town in recent years in Indian food processing industry and successful, do you think dairy industry is mature enough for this type of investments? Being the world’s second largest populated nation, with nearly half its population below 25 years of age, food processing companies in India have been an obvious choice for private equity (PE) investors. PE investors tend to like food companies as they grow fast and the business tends to be steady once a brand name has been established. As far Dairy is concerned, this industry is one of the fastest growing segments in India, many local corporate and MNC’s have already started to make a room for themselves. In the last few years the demand for Milk and Milk products has grown tremendously due to changing lifestyle of consumers, growth in the food services industry, increasing urbanisation, rising need for convenience, better health awareness among end-users, etc. Once,

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the Indian milk arena was ruled by the co-operatives but the scenario is fast changing. More and more private players are trying to explore this opportunity. And this had led to competition, which ultimately brings professionalism and technological excellence with fair remuneration to Farmers. Hence, I believe this has helped in gaining confidence of the investors and making dairy industry to look for. Growth/demand of milk products other than milk has also been on higher side in India, do you see it as a good venture for value addition in the Industry? Yes, in coming days the industry will be driven by value added products. Growth for value added products is driven by several factors such as changing lifestyle of consumers, growth in the food services industry, increasing urbanisation, rising need for convenience, better health awareness among end-users, etc. Sensing higher demand for processed milk and milk products, several domestic and global players forayed into different value added segments (leading to higher margins) to gain a higher market share. The processed milk and milk products segment is expected to record about 1213% CAGR between fiscal 2014 and fiscal 2017. The processed dairy industry in India was estimated to be around Rs. 3,650-3,700 billion, out of which milk

products accounted for around Rs. 1,4901,530 billion. Paneer and khoa (32%), ghee (30%) and curd products (22%) account for the major portion of the milk products segment. Also among the value-added dairy products, the cheese segment is most promising, both in terms of consumer demand and business profitability. Traditionally, India has not been a cheeseconsuming nation as consumers’ tastes were skewed towards a softer Indian variant of cheese - paneer. However, in recent years, demand for cheese has seen a very healthy growth rate, thus attracting both domestic and foreign players. In the last few years the demand for value added products from the HORECA segment has grown tremendously and Company like us are in the process of expanding our production capacities for several new dairy products including mozzarella cheese, cheddar cheese, processed cheese, cottage cheese (paneer) and shrikhand to tap this market.

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