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Emerging Market Scenario- Changing Food Basket & Space for Value Addition
PRESENTATION BYVeerender Thakur, General Manager
Indian Food Industry
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INDIAN FOOD MARKET
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Second largest arable land in the world Diverse agro-climatic zones across the country, Round the year sunshine Potential to cultivate a vast range of agricultural products Large marketable surpluses and abundant raw material for processing Vast pool of skilled manpower in research and extension
THESE ADVANTAGES BEING LEVERAGED, FOR INDIA TO BE A LEADING FOOD MARKET IN THE WORLD
Indian Agriculture
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04/10/234
The Indian Paradox
We are among the top few producers of many agricultural commodities in the world… Yet our share in world food trade is only 1.6 %
The post-harvest losses of fruits and vegetables are estimated to be 25 to 40 %, amounting to more than Rs. 30,000 crores… Yet less than 2 % is processed !
We have a middle class of 250-300 million people with adequate purchasing power to buy manufactured goods… Yet value addition to agricultural products is less than 7%
More than 220 million tonnes of food grains production… Yet more than 130 million people go to bed hungry every day !
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5
Low Value Addition
India
Brazil
Thailand
New Zealand
USA
Comparison of value added in agriculture and food processing*
Agriculture
Food processingPer cent
33875
Source:Indiainfoline; Bloomberg
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6
Adding Price Without Adding Value !
Consumer
Retailer
Sub-Wholesaler
Wholesaler
Market level commission agent
Consolidator/villagelevel trader
Small / marginal farmer
< 25%
< 6%
< 10%
< 8%
< 10%
Total mark-up in the chain
Total margin - 60 to 75 % Margin from farmers to
wholesaler - 30-35% Wastage - 15-25% Transportation - 10% approx.
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7
What we need…
Transition of Indian agriculture from a “Low input-Low output” farming system to a “High input – High output” system
Increase Value AdditionCut costs by efficient Logistics ManagementProvide Consumer Satisfaction by giving him value
at a price he can affordBe Internationally Competitive
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Food Processing - Current Scenario
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• The Food Processing industry currently valued at about US$ 100 billion & is estimated to grow at 9-12 per cent, basis estimated GDP growth rate of >8 per cent and increasing disposable income
• Value addition of food products is expected to increase from the current 8 per cent to 35 per cent by the end of 2025
• Fruit & vegetable processing, which is currently around 2 per cent of total production will increase to 25 per cent by 2025
•All these developments will need extensive logistics, quality storage and transportation
Indian Food Processing Industry -Trends
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Growth Trends for Major Food Products
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-2015
Years
Vo
lum
e (M
T)
Meat and Poultry Seafood (export) Frozen F& V Cheese
Imported F & V Butter Ice Cream Chocolate
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Number of Food Processing Units in Organized Sector
Fruit & Vegetables Processing Units 5293
Fish Processing Units 568 (+482 Cold Storage cum icing Units)
Meat Processing Units 171
Milk Products Processing Units 266
Flour Mills 516
The industry is estimated to grow at 9-12 per cent, on the strength of 8% GDP growth during last 5
years
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Food Processing Industry : Market Size & Growth Matrix
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• Expanding the market and new channels : Regional to national foot print ( Sudha dairy, Bihar), Rural marketing (HUL), Franchisee model (APDDCF, Andhra dairy)•International players : Entry of International players in food processing and value added services - Del Monte, Walmart, Carrefour•New & Innovative Products: Pepsico’s Nimbooz, Aliva snacks, Minute maid from Coca cola, Maggi Ataa Noodles•Strengthening of linkages :
• Development of back end - Contract farming, investment in modern storage
• Emergence of third party logistics
Indian Food Processing Industry -Trends
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•Rise in disposable incomes
•Changing Lifestyles and Aspirations
•Increasing penetration of organised retail and branded food products
•Increase in demand for Functional Foods
•Increasing Nuclear Families and Working Women
•Increasing spends on health foods
•Govt policies and incentives for the food processing industry
Industry Growth Drivers
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The emerging Segments
Frozen foods Frozen vegetables Poultry Meat and Fish products
RTC & RTE food productsConvenience foods segmentBreakfast cereals & Health foodsOrganic
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Frozen Food Industry -
Opportunity for Cold Chain
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Privileged and Strictly Confidential
High Volume
High Volume Chilled Fresh Fruit (Apple, Pears, Grapes) - 1 MMT annual growth 5% Fresh Vegetables (Off season produce) – 1 MMT annual growth15% Potato 12 million MT Packaged milk estimated 12 – 15 % of Annual production of 105 million tons
annual growth 5% Milk (Metro) @ 15% of production annual growth 10% Yoghurt & Butter 50,000 MT Meat & Seafood 0.5 MMT
High Volume Frozen Frozen Meat, Poultry & Seafood– 539,000 MT
annual growth 5% Ice-cream 200 million litres annual growth 12-15%
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Privileged and Strictly Confidential
Medium & Low Volume
Medium volumeImported Fresh Produce – 80,000 MT annual growth 10% Frozen Vegetables – 40,000 MT annual growth 20%Cheese 10,000 MT annual growth 10%French Fries –10000 MT annual growth 15%Chocolates – 5,000 MT, Dough – 20,000 MTFloriculture 24 million stems
Low VolumePharmaceuticals VaccinesPhotographic Film
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Status of Cold Chain in India
Commodity Production
(million MT)
Volume moving through CC (mill
MT)
Reefer Trucks
Cold Storage (Million MT)
Milk 105 N A 20,000* 0.07
Meat & Poultry
6.5 5.39 5000 5.39
Fisheries 6.1
Fresh F & V 188
Potato 34.4 0 18.2
* Includes insulated vehicles
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Refrigeration Market In India
Cold Storage13%
Coolers52%
Freezers12%
Transport Refrigeration
4%
Industrial Refrigeration
19%
Cold Storage
50%
Transport50%
Segments
Delhi26%
Mumbai24%
Bangalore7%
Chennai5%
Kolkata11%
Jaipur2%
Chandigarh1%
Others24%
Geographical Distribution
Milk & Milk Products
24%
Marine Products
22%Fruits &
Vegetables19%
Meat & Poultry14%
Ice cream10%
Others11%
Cold Chain Market by Products
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Service Trends in Logistics
Inhouse33%
Out Source12%
Both Inhouse & Outsource
55%
Most companies forced to establish own logistics as reliable service providers not available
Cold Storage
5%
Transportation
50%
Both45%
95% Transportation including refrigerated is outsourced
Services Outsourcing
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Trends in CCM Logistics Outsourcing
Integrated service providers End users and organized retailing prefer integrated service providers.
For ex: Baskin Robbins, McDonalds, Walmart
FMCG companies, who needs to cover large geographical areas are more dependent on large number of small service providers and Clearing and Forwarding Agents due to interstate taxation
Another reason for not outsourcing to integrated service providers is due to policy of pushing products and collecting the money by sales personnel of brand owner.
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Not Satisfied36%
Satisfied64%
Most FMCG companies are not happy with their transport service providers
Inte
ntio
n to
Sw
itch
Yes43%
No57%
Only 36% users are dissatisfied but 43% are willing to change their service providers indicating tremendous latent demand mainly due to Non availability of services during peak period Lack of choice
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Privileged and Strictly Confidential
Product Movement
Fresh Fruit & Vegetables Temperate (Apples & Pears) from
North to countrywide Grapes from Mid West to
countrywide mainly North Banana from West to North Vegetables from concentrated
pockets of production criss cross
Small and big traders drive business
Frozen Fruit & Vegetables Peas are shipped from North
countrywide Other vegetables are shipped
similarly French Fries enter via Mumbai
and are shipped to metros mainly
Players include Safal, Chambal, McCain, Vadilal, Sumeru, Al
Kabeer
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Privileged and Strictly Confidential
Product Movement
Meat & PoultryMeat Export is major
commodity group, move from Delhi to Mumbai in large quantity (200000 MT)
Local distribution movement, for instance, to Punjab from Rajasthan
Poultry has both regional and national movement on demand supply equation
Fish & SeafoodsExporters use own stores
and trucks for economyMovement from coast to
hinterland Andhra ships seafood & fish
countrywideGujarat ships seafood to the
NorthLocal traders
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Privileged and Strictly Confidential
Product movement
Chocolates & Other (RTC RTE)
Shipped nationally by Cadburys, Amul, Nestle
Pharma & VaccinesConcentration of industry in
Gujarat, Maharashtra, Andhra Pradesh, Himachal Pradesh
Shipped nationallyFilms Kodak, Fuji
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Privileged and Strictly Confidential
Product Movement
Chilled Dairy Products Countrywide milk plants ship
milk, curd, paneer, flavored milks Butter is shipped nationally Cheese is shipped nationally
Players include Brittania, Amul, LeBon, Mother Dairy, Heritage,
Aavin, Vijaya, Verka, Vita, Nestle
Ice-cream Works on mainly 250 – 300 km
plant radius Only Amul & Baskin Robbins ship
pan India
Players include Walls, Vadilal, Mother Dairy
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Mov
emen
t Rou
tes
of
Snow
man
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Value Added Services - Cold Chain
About 10-15% of food passes through cold chain and segment is growing at 15-20% annually
Main products are: Dairy Products (ice cream, butter, cheese, paneer); Fresh and Frozen F&V; Meat & Poultry; Fish & Marine products; Confectionary and Chocolates
Opportunities for primary and secondary distribution. Hubs at strategic location will facilitate city distribution
Also caters to other sectors like pharma, photo films etc.
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