Emerging Market Scenario- Changing Food Basket & Space for Value Addition

PRESENTATION BYVeerender Thakur, General Manager

Indian Food Industry

INDIAN FOOD MARKET

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

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 !

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

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.

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

Food Processing - Current Scenario

• 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

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

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

Food Processing Industry : Market Size & Growth Matrix

• 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

•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

The emerging Segments

Frozen foods Frozen vegetables Poultry Meat and Fish products

RTC & RTE food productsConvenience foods segmentBreakfast cereals & Health foodsOrganic

Frozen Food Industry -

Opportunity for Cold Chain

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%

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

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

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

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

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.

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

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

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

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

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

Mov

emen

t Rou

tes

of

Snow

man

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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