mrunal [food processing] supply chain management, upstream downstream requirements for fruit &...

3/5/2014 Mrunal [Food Processing] Supply Chain Management, Upstream Downstream requirements for Fruit & Vegetables, Confectionery industries » Mrunal

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[Food Processing] Supply Chain Management, Upstream Downstreamrequirements for Fruit & Vegetables, Confectionery industries

1. Prologue

2. What is supply chain management?

1. What is upstream-downstream?

2. What is Forward-Backward Integration?

3. Vertical integration

3. Food Industry: Supply Chain

1. FHEL’s Apple Business: Optimized Supply Chain

1. FHEL’s Apple Upstream

2. FHEL’s Apple Downstream

4. Fruit Veggies Processing (F&V)

1. Fruit-Veggies SCM: Upstream Requirements

1. #1: Need New Varieties

2. #2: Need more Cold Storages

3. #3: Transport

1. Horticulture trains

2. Kisan Vision Project

2. Fruit and Veggies SCM: Downstream Issues

1. Export Transport

2. Export: Regulatory issues

5. Chocolate /Confectionery Business

1. ChocoSCM@Upstream

1. #Sugar

2. #Cocoa

2. ChocoSCM@Downstream

6. Misc. useless Tables

1. Leading States: Fruits

2. Leading States: Vegetables

3. Big Companies: Fruit/Veggies Processing

4. Big Companies: Chocolate business

Prologue

In the previous articles we saw

1. Food processing industry: Awesomeness and Obstacles

2. Food processing industry: Truckload of Government Schemes and bodies

3. Marketing of agricultural produce: issues and constrains, Nuisance of APMC Acts and

Commission Agents

4. Agro/Food Processing: Export, Dumping, FDI, Finance, Taxation, Budget Provisions,

http://mrunal.org/

http://mrunal.org/2013/08/food-processing-introduction-scope-significance-awesomeness-hardly-obstacles-truckload-of-for-gs-mains.html

http://mrunal.org/2013/08/food-processing-mega-food-parks-agri-export-zonesaez-cold-chains-and-truckload-of-government-schemes.html

http://mrunal.org/2013/08/food-processing-nuisance-of-apmc-acts-commission-agents-marketing-of-agricultural-produce-issues-and-constrains-for-gs-mains.html

http://mrunal.org/2013/08/agrofood-processing-export-dumping-fdi-finance-taxation-budget-provisions-codex-nwr-brgf-rkvy.html



CODEX, NWR, BRGF, RKVY

Moving on, in this article we see topics

UPSC General studies Mains Paper 3 Syllabus TopicTopics touched inthis article

Food processing upstream and downstream requirements,supply chain management.

Fruit-VegetableConfectionary

1. Infrastructure: Energy, Ports, Roads, Airports,Railways etc.

2. transport of agricultural produce and issues andrelated constraints;

Horticulture trains

What is supply chain management?

Supply chain is a system that links a company with its suppliers andcustomers.Supply chain management (SCM) tries to optimize ^this system by…

1. getting the right things2. to right place3. at right time4. In a cost-effective manner.

What is upstream-downstream?

In any business, you get input (men/material)==>process it==>output(goods/service).In Supply chain, Upstream-downstream depends on the point of reference.For example,

Point ofreference

Upstream Downstream

farmerTraders of seeds, fertilizer, pesticidesand agro-machinery.

1. middlemen @Mandi2. Food company (if he

has contract farmingagreement)

3. households (if he isdirectly selling tofinal customers)

1. Farmers,1. distributors

http://mrunal.org/2013/08/agrofood-processing-export-dumping-fdi-finance-taxation-budget-provisions-codex-nwr-brgf-rkvy.html



foodprocessingcompany

2. Mandi-agents3. Suppliers of food-preservatives,

edible-colors, plastic-aluminumpackaging etc.

2. wholesalers3. retailers4. final-customers

Kirana shop Wholesaler Aam-admi

Flipkart.com

Book publishersMobile/electronics/computercompaniesSuppliers of packaging boxes,bubblewrap plastic etc.

Online buyers

In short,

Upstream downstream

towards suppliers to your company (+intermediaries if any)

towards consumers(+intermediaries if any)

What is Forward-Backward Integration?

Integration Backward Forward

WhatCompany expands itsactivities toupstream areas

Company expands its activities todownstream areas

Why?

Company aims to getraw material @cheaprates, uniformquality, steady supplyand eliminate anymiddlemen.

Company aims to get more control over sales,consumer-contact and eliminate anymiddlemen/kiranawalla/wholesellers/retailers.

1. Amul sets updairy farmers’cooperative invillages tocollect milk.

2. In the late 60s,DhirubhaistartedReliance fortextilemanufacture.But sincepolyester ismade frompetrochemicals,so he entered in



Examples

Petrochemicalbusiness. Butpetrochemicalis derived fromPetroleumrefining, so hemoved intoPetroleumrefining as well.

3. AndrewCarnegie’smain businesswas Steel. Laterhe boughtcoalmines,iron-ore mines,even the shipsand railwaysthat transportedraw material tohis steelfactories.

4. Starbucks(chain ofcoffee bars)buys coffeeplantations inCentralAmerica.

5. When a Carcompanyacquires a tirecompany, heavyengineeringcompanyacquires a steelplant etc.

1. Amul has its own pizza outlets and icecream parlors.

2. Raymond opened an outlet in Karachithis year.

3. Nike, Adidas, Apple have their ownretail outlets in big cities.

4. Flipkart has its own courier “Ekartlogistics” so they don’t have to rely onBluedart, DHL and other couriercompanies to deliver packages.

5. And of course, if some Desi-liquormafia opens dance-bars and gamblingdens, that is also an example of Forwardintegration.

Vertical integration

When company’s backward and forward integration is so good that itpractically runs everything from making raw material to selling final productto final customer. Example Oil giants such as Shell/BP have their own oilwells (supply), refineries (processing) and petrol pump (retail).In other words, Vertical integration is achieved when Single firm absorbsseveral firms involved in all aspects of a product’s manufacture from rawmaterials to distribution.For Indian food processing industry, Vertical integration is extremely



difficult because like we saw earlier:Indian food entrepreneurs are small sized and loan starved, whileVertical integration requires deep pockets and truckload of cash.FDI permitted only in a few specific sectors of Agriculture. Many stateshave outdated APMC laws. = backward integration is difficult.FDI in Multibrand retail is permitted but with many conditions.=Forward integration also difficult.

So, what we can have is “linkage”. For example

Setup promotes ____ linkage from ____’s point of view

Mega Food parksBackward food industry’s

Rythu Bazar forward farmers’

Food Industry: Supply Chain

Indian Food processing supply chain has two type of Stakeholders

stakeholder Who?

those included in SupplyChain

1. Creators: Farmers, Food Entrepreneurs2. Contributors: Middlemen, Retailers,

Commodity Exchange3. Consumers: Domestic And Foreign

those influencing supplychain

4. Government: Laws, Taxation, Incentives5. Infrastructure: Transport, Storage, Power

Based on level of processing, we can classify food products into:

ProcessedProducts

What?

PrimaryProducts consumed in the original state. Don’t have any no valueaddition. (e.g. just chop apple from the tree, pack it in wooden-boxesand send to market)

SecondaryBasic level of processing: grading, sorting, cleaning, cutting, drying,grinding etc. before they are consumed. (e.g. dried fish, turmericpowder, chili powder, wheat flour.)

TertiaryCombining multiple primary, secondary products from above anddoing high value addition (e.g. ice creams, biscuit, jam, cakes,pastries etc.)

As you can imagine: tertiary food products ought to have a longer supply chainthan primary products because tertiary food products need variety of inputs.But in India, even primary processed food too has a lengthy supply chainthanks to dozens of intermediaries before farm produce reaches the fork.

http://mrunal.org/2013/08/food-processing-mega-food-parks-agri-export-zonesaez-cold-chains-and-truckload-of-government-schemes.html#355

http://mrunal.org/2013/08/food-processing-nuisance-of-apmc-acts-commission-agents-marketing-of-agricultural-produce-issues-and-constrains-for-gs-mains.html#608



Observe the following diagram:

click to enlarge

As you can see this supply chain is lengthy and fragmented= high cost and wastage.An ideal fruit supply chain should be similar to FHEL’s.

FHEL’s Apple Business: Optimized Supply Chain

Container Corporation of India (CONCUR)= a PSU under Railways ministry.Fresh and health Enterprises ltd (FHEL) = subsidiary company underCONCUR, started in 2006to create world class cold chain infrastructure in the country

FHEL’s Apple Upstream

RawMaterial

FHEL directly procures Apples from Shimla & Kinnaurdistricts of Himachal Pradesh and transports them to Sonepatfor sorting, grading, packing & storage.Company has its own trucks, as a result apples reach to fromHP to Sonepat within a day.

UniformQuality

FHEL sends Agro-scientists to the Apple farmers on its owncost.These scientists interact with the farmers, help improvingapple quality and productivity, post-harvest management.FHEL also arranges all inputs required by the farmers like

http://www.flickr.com/photos/97816112@N02/9618365623/



nutrient packages, pesticides/ fungicides, packing materials,farm implements, etc.

MiddlemenFHEL was among the first companies to procure apples directlyfrom the farmers and has now refined the procurement system. Thishas eliminated middlemen in the chain.

Price

FHEL works in an open and transparent manner (unlikeUPSC), therefore, when FHEL procures apples, all thefarmers in Himachal Pradesh know the rates offered by it.This acts as a benchmark and all the farmers are able tobargain well with other apple traders.

StorageThe company has state-of-the-art storage technology toensure that the apples last upto 8 months in the storage +sorting, grading, packaging facilities.

FHEL’s Apple Downstream

FHEL sells its apples

1. via Marketing Associates in Delhi, Mumbai, Chennai, Ahmedabad and otherbig cities

2. Via Cash and Carry wholesale or Retail Chains such as Bharti Wal-Mart, BigBazaar, Aditya Birla retail, etc.

With the above upstream and downstream arrangements, FHEL has shortened andoptimized its supply chain and as a result

1. less spoilage / wastage of apples2. More profits to both company and farmers, since middlemen are eliminated.3. Apple available at cheaper price to consumers

Ok well and good for FHEL’s apples but most of the Indian food processingindustries don’t have such supply chains. From the last three articles on [FoodProcessing], we can derive a few common points

What are the upstream requirements for efficient supply chain management?(From Food entrepreneur’s point of view)

Upstream requirement solution

1. Need backwardlinkage with farmer:via contract farming

2. Need to eliminatemiddle-men.

1. Amend State APMC laws.



3. need uniform highquality raw material

2. R&D and exertion services in agro3. introduce new fruit/veggie hybrid varieties4. farm mechanization5. land reforms6. farmers should easily get loans7. FDI only permitted in a few specific agro-

sectors. Relax this policy.

4. Need steady supply ofinputs @reasonableprices

8. cold storage infrastructure for seasonal rawmaterial e.g.potatoes

9. Reduce indirect taxes on agro-produce,packaging material, preservatives, food colorsand other chemicals.

5. quick transport 10. railroad connectivity

Next, What are the Downstream requirements for efficient supply chainmanagement? (From Food entrepreneur’s point of view)

Downstream-Requirement solution

Organized retail stores, forefficient distribution ofproducts

FDI in Multibrand retail

Reaching the costumers inforeign countries

compliance with CODEX, HACCCPstandardsR&D, product development,packaging keeping those foreignersin mindPromotion of Indian products abroadless taxes on air-cargomore efficient cargo handling atportsbetter railroad connectivity withports

Fruit Veggies Processing (F&V)

In the first article we had seen the scope-significance of entire food processingindustry. Now let’s get more additional points specific to Fruit-veggies industry:

Top 5 States

VEGGIES FRUITS



UPWBBiharOdishaTN

AndhraMHGujTNKarnataka

Big list of individual fruit/veggie grower states= given at bottom under the title“Misc.”

Export potential

Processed Food demand and export potential in

Mango PulpSaudi Arabia, Kuwait, UAE, Netherlands andHong Kong

Pickles, ChutneySaudi Arabia and UAE, USA, UK andGermany

Tomato Paste, Jams, JelliesAnd Juices

USA, Russia, UK, UAE and Netherlands.

Fruit Juice demand

More youth + Higher disposable incomes + ‘heath’ consciousness=> Urbanjunta preferring fruit juices over carbonated drinks (e.g. Thumbs up, Coke)In 2012, Fruit Juice segment was more than 50 billion rupees.This shift is creating newer opportunities:

Exotic flavors: cranberry, lychee and pomegranate,Vitamin, nutrient or fiber-enriched fruit juices.

Big players have responded to this trend by focusing on their non-carbonatedsoft drinks (+More ads using Bollywood celebrities like SRK, Kat, Bips)

Fruit juice product Boss

Slice, Tropicana Pepsico

Real Dabur

Maaza Coca Cola

Frooti Parle Ago

Fruit-Veggies SCM: Upstream Requirements

#1: Need New Varieties

Almost 1500 mango varieties are grown in India but only 3-4 of them are worthy ofexport but they too face problems:

AlphonsoMango

Famous and highly valued. But due to its thin skin, it can only remainfresh for 20 days (even in cold storage) = low shelf life.

Totapuri Cheaper than Alphonso mangoes and have higher pulp content. ButTotapuri mangoes banned in some foreign countries due to ‘stone


http://mrunal.org/2013/08/food-processing-supply-chain-management-upstream-downstream-requirements-for-fruit-vegetables-confectionery-industries.… 10/19

mangoes weevil’ pest

Similar problem for other fruits/veggies:

Rawmaterial

quality problem

PotatoMost Indian potato varieties = don’t have uniform size andlength=> can’t make good chips/French fries.

OrangeVery old variety grown in India= high bitterness level and pipcontent.Pepsi and Dabur import orange juice concentrate for their juices

Apple

India grows “red delicious” variety = very cheap and hencepreferred by Desi costumersBut this apple varieties has cardboard-like texture and peculiartaste that foreigners hate. Hence US/EU consumers prefer NewZealand / Australian Apples over Indian.

Nuisance of Middlemen

For most fruits, the cultivation/gestation period at least 3-4 years. But banksdon’t easily give loans to farmer for such long period.Hence difficult to encourage farmers to experiment with new varieties offruits/veggies, even if the new variety has more profit/export potential.Given this lack of timely financing from banks / financial institutions, thefruit-farmer goes to middlemen, who advance money to the take the farm onlease.Then middlemen manipulates selling prices, to enhance their margins. e.g.Indian Mangoes=wide price fluctuations in Middle-east.South American countries offer more consistent prices and are a threat toIndia. India’s dominance in the pulp sector is gradually eroding due to thisfactor

What is the solution/requirement?

1. Research-development (R&D) to make new varieties of fruits n veggies withlonger shelf life, disease resistance and export quality-uniform size-length-color-texture.

2. Government should promote cultivation specific fruits and vegetables in aspecific states. It would lead to ease in monitoring of new verities + uniformquality=> easier to process + export worthy. For example

RawMaterial

What to do? Where to focus?



Orange Develop varieties with low-bitterness, suitable forjuice-processing

Maharashtra,Andhra Pradesh

PotatoDevelop varieties suitable for processing intoFrench fries, Chips (low sugar content, uniformlength)

UP , West Bengal,Gujarat

AppleEncourage cultivation of foreign Varieties fromNZ, S.Africa etc.

Jammu &Kashmir,Himachal Pradesh

MangoIdentify other varieties for processing, and reducedependence on Totapuri, Alphonso

UP , AP , TN,Maharashtra

SapotaFocus on cultivation of uniform size, firm fruitswith longer shelf-life

Karnataka,Maharashtra,

LitchiCultivate varieties with higher shelf life, andsmaller seed size

Bihar, WestBengal

OnionsCultivate sweet and white onions- they have exportdemand

Maharahstra

Partnership/Collaboration

As we saw above, Indian orange=bitterness=not good for juice making. Pepsiimports FCOJ (Frozen Concentrate of Orange Juice) as raw material for itsTropicana juice brandRecently Pepsi and Government of Punjab have partnered to promotecultivation of new orange variety in Punjab, to reduce dependence on theimported FCOJ.More such partnerships are necessary in the Fruit-veggie sector R&D.

#2: Need more Cold Storages

Why is Cold storage important?

1. Reduces losses due to spoilage2. Reduces gluts and distress sale by growers,3. Reduces transport bottlenecks at the peak period of production,4. Maintains quality of the produce5. Ensures that a crop harvested over a period of one or two months is capable of

serving the round the year market demand.

#investment in cold storage

Broadly, fruits & vegetables can be classified into three segments, based on theirshelf-life in cold storage

Shelf lifeinColdStorage

Example Does it attract investment?

A Long (6-8Potato, Apple, Chilies

Most investment comes here.Especially for potato- for hoarding



moths) during lean season.

BModerate(8-10 weeks)

Grapes, Pomegranates,Banana, Tomatoes

not much investment coming here,Except few export oriented chains.

Csmall (fewdays)

Papaya, Melons, Gourds,Cabbage, Cauliflower,Leafy Vegetables.

hardly

Needless to say, for category B and C, government needs to provide innovative tax-reliefs/incentives to attract more investment.

NonHorti

There has been a relative neglect of the non-horticulture cold chainsespecially those relating to meat, poultry and fishing.State Governments need to actively work on these cold chains viatheir Animal Husbandry & Fisheries Departments.

Newtech

In cold storages, following technologies need to be adopted

1. Use of Global positioning system (GPS),2. better electronic weighing systems,3. local language billing machines4. General Packet Radio Services (GPRS) for updating the details on

the central server for storage and movement of produce in and out ofcold storages

#Electricity

Desi cold storages have high operation cost than their foreign counterparts,mainly because of high consumption of electricity.Reason: Food entrepreneur doesn’t buy efficient (and expensive) equipmenton Engineer’s advice. Instead, they buy cheap quality equipment on CA’sadvice. Why? Because we saw earlier, government schemes have ‘low-ceilings’ + if project cost increases too much food-entrepreneur won’t getloans under Priority sector lending of Bank and won’t be eligible for varioustax benefits available to MSME industry.

#3: Transport

Government: enhance road-connectivity to rural areas.Entrepreneur: needs to get easy loans for reefer vans and refrigerated trucks.Railways: Introduce dedicated horticulture trains. More frequency of freighttrains in agro-regions.

Horticulture trains

Who?1. National Horticulture Board (NHB)2. Container Corporation Limited (Concor), under Rail Ministry



Why?

Because conventional goods trains have following problems

1. have no ventilation => fruit/veggie gets rotten2. Since there is no ventilation, they keep the doors open =>theft

during transport.3. slow speed

When?

2009: idea mooted under Kisan Vision Project of Indian Railwaysin 2009.2012: Horti train between Maharashtra and Delhi, with banana andpotato as core cargo.

12th FYP: 100 crores to be spent on this project

Benefits/Features of Horticulture trains:

1. Specially designed containers with good ventilation=>increases the shelf lifeof the produce

2. Container train has been designed to run at a top speed of 100 kilometre perhour (kmph) as against the maximum speed of 75 kmph of conventionalrailway wagons and trucks= faster delivery less rotting.

3. Accepts small quantities, to the unit of one container without agents ormiddleman. Even small farmers who wish to transport goods to variousdestinations now have the chance to do so without coughing up huge sums tomiddle-men or clearing agents.

Let’s see an example, “Banana Train”= connects Maharahstra to Delhi. Lauched inSept.2012

corecargo

direction

BananaJalgaon (MH) to the rail yard of the Azadpur mandi in Delhi.by the way,Azadpur Mandi @Delhi= Asia’s biggest market for fruits and vegetables.

Potatos in the return journey (i.e. from Delhi to MH).

If train returns empty with no cargo=uneconomic. In Delhi-Maharashtra route, weconnected them with Banana and potatoes. Similarly following projects should beconsidered:

1. Delhi to W.Bengal (Apples) and return WB to Delhi (potatoes)2. JK to Delhi (Apples) and return Delhi to JK (potatoes: originally from WB)

Kisan Vision Project

Who? Railway Ministry

When? Mamta’s rail budget 2009*

Why?To encourage creation of facilities of setting up cold storage andtemperature controlled perishable cargo centres through Public Private



Partnership (PPP)

How?

PPP via public sector logistics viz.

1. Container Corporation of India Ltd. (CONCOR)2. Central Warehousing Corporation (CWC)3. Central Railside Warehouse Company Ltd. (CRWC)

*Although topic is from 2009 but been in news in August 2013 for:

1. Rail Minister’s reply in Parliament (available @pib.nic.in)2. News reports on how it is #epicfail

And for us, it becomes important for GS Paper 3 because UPSC syllabus contains

1. Infrastructure: Energy, Ports, Roads, Airports, Railways etc.2. transport of agricultural produce and issues and related constraints;

Anyways, under this Kisan Vision project, 6 Perishable Cargo centers were to bedeveloped at:

1. Nasik (Maharashtra)2. New Azadpur (Delhi)3. New Jalpaiguri (West Bengal)4. Singur (West Bengal)5. Dankuni (West Bengal)6. Murshidabad (West Bengal)

A Pilot project was started @Singur, WB in 2009 itself but yet to take off because

Although facility has the capacity to store more than 1,000 tonnes ofpotatoes, but lack of proper roads for trucks to enter the area. Recall thecriticism of government schemes from earlier article…. Most schemes seek toget investors to pump money in (Cold storage) infrastructure withoutproviding the necessary (road) support for the utilization of the infrastructure.Cold storage projects have to be near the market, especially the multi-purposeones. This project was located far away from the market and could not findmany takers.

Fruit and Veggies SCM: Downstream Issues

Export Transport

It takes about 3 weeks to send Mango from India to EU via sea=> seatransport is unsuitable for Alphonso Mango export. You’ve to transport it viaairIndian air-cargo-transport=> fuel surcharge and variety of taxes. Combine thatwith exchange rate difference =Pakistani mangos are cheaper in EUcompared to Indian mangos.Similarly Terminal handling charges at several ports are also high (compared

http://mrunal.org/2013/08/food-processing-mega-food-parks-agri-export-zonesaez-cold-chains-and-truckload-of-government-schemes.html#3



to Hong Kong etc).poor frequency of ships / flights leaving from various ports / airportsneed customs clearance=>inefficiency, delays, bribes

All ^these results into

1. wastage of perishable food/veggies2. Higher cost of transport => product price increased in destination country =

pricewise, it becomes uncompetitive.

Export: Regulatory issues

Japan Indian mangoes without Vapour heat treatment (VHT)=banned.

Australia Indian mangoes import facing problem due to fruit fly

USA Indian mangoes import facing problem due to Stone weevil.

EU and in the Middle East follow CODEX standards when importing fruitbased products.India’s problem: Lack of post-harvest treatment facilities such as for vaportreatment – Lack of packhouses from farm to port.Even after complying with these requirements, Indian exporters need to inviteand sponsor visits of the quarantine departments of the relevant importingcountry for lifting of the ban. Such visit / inspection costs about ~ USD100,000/visit/personSimilarly for grape exporters: the cost of EurepGap certificate Rs.75000 /farmer.APEDA (under Commerce Ministry) provides financial help for Eurepgapcertification, more fruits and veggies need to be given similar help to meetwith the certification/ requirements in foreign markets.

Retail

As we saw in the first article, The Kirana-wallas in USA (known as mom and popsstores) have cold storage / refrigeration hence they can sell fresh fruits/veggies butour cart-pullers, small-veggies sellers don’t have such facilities=wastage. HenceFDI multi-brand=necessary for the growth of fruit-veggie industry and to containfood inflation.

let’s move to next sector:

Chocolate /Confectionery Business

Scope/significance:

The per capita chocolate consumption in India is much lower than most Europeancountries. But there is lot of potential in upcoming years, because:

1. Increased disposable incomes, newly rising middleclass = higher propensityto spend on impulse categories such as chocolate.

2. Chocolates-sale no longer confined to children only. Companies trying the



power of advertisement to attract:Youth= Those ads involving romance/valentine day angle.Middle-aged= Chocolate gift boxes for Diwali and Raksha-bandhan etc.This advertisement model has been successful in China, chocolate boxgift has become a routine-gift for wedding receptions.

Year Chocolate business in billion Rs.

2012 60

2017 (Projected) 140

(^doesn’t include the income of Dentists.)

ChocoSCM@Upstream

#Sugar

(same can be used for soft-drink industry)woolly aphid (an insect pest) causing high damage to sugar crops inMaharashtra and KarnatakaUP’s yields are much lower than TamilNadu.successive increase in sugarcane prices in past years, mainly politicallydriven= abnormally high cost of production of sugarThis Increase in raw material (sugar) prices has hurt profit margins ofconfectionary units because companies are unable to pass on the higher coststo consumers.^To put this in other words- the dairy owners can form a cartel and raise milkprices every month, but you’ll still purchase it, because milk is an essentialitem.But If toffee makers form a cartel and raise price of 1 toffee from one rupeeto two rupees, then most people will stop buying or giving additional pocketmoney to their kids! Meaning toffee-maker cannot ‘pass’ the increased rawmaterial cost to the final consumers.Hence Desi confectionary industry wants rationalization of the sugarcanepricing policy. For more read Ranagarajan Sugar committee article click me.

#Cocoa

Kerala is the leading cocoa producing state in the country but industrialdemand is significantly higher, estimated at nearly three times the cocoacultivation.But cocoa cultivation= Inadequate marketing network + fluctuations in prices=farmers feel insecure.Indian varieties of cocoa=low chocolate yield.Need R&D, Need to introduce superior varieties using clonal technology toimprove yields.Cocoa buying attracts >10% purchase tax in Kerala= input cost increased forconfectionary unit.

http://mrunal.org/2013/01/economy-sugar-pricing-decontrol-rangarajan-committee-frp-sap-meaning-issues-explained.html



BaseGum

We’ve to import most of the basegum (for chewing gum) fromEurope and South East Asia=>manufacturing cost increased.Need to promote R&D and production for base gum within India.

@Processing

Innovation

To create new demand and to attract health conscious adultconsumers, industry needs to develop sugar-free, fruit basedgum, vitamin-enriched products, breath strips etc. like theAmericans are doing to attract the diabetes patients.

Packaging

In developed markets, consumers buy chocolate/toffees inlarge pack.But Indian consumer=price conscious, hence toffees usuallysold in single unit (e.g. 1 éclairs for 1 rupee)smaller/Individual package=need more plastic=Operation costincreased

ChocoSCM@Downstream

TaxationUnorganized/non-branded toffee makers= evade taxes.This puts organized confectionery (branded players) at adisadvantage, especially in rural areas.

Reachlocal kirana stores and large retailers, paan and cigarette outletsare covered extensivelyBut cost of distribution is high particularly to rural outlets

freebies

In Toffee business you’ve to lure kids by offering free tattoos,stickers, toys etc.In the aspect, Indian toffee makers are far behind theirAmerican/European counterparts.

ExportPotential

Currently, African countries= dominated by Brazilianconfectionary import. Much potential for Indian toffee makers.In China, the recent trend of gifting chocolate at weddingbanquets has led rise demand for premium-chocolate gift packs,we can make an entry Chinese market too.Indian confectionery products don’t find demand in US/EU dueto lack of innovative products/flavors compared to their localproducers. But The Indian industry can engage in contractproduction for foreign brands, given the lower manufacturingcosts in India. (chocolate “outsourcing”)



Misc.Useless tables

Just some stupid Tables for informative purpose only, otherwise hardly relevantfrom exam point of view.

Leading States: Fruits

Fruit leading producer

Banana Maharashtra, Tamil Nadu, Karnataka

Mango Andhra Pradesh, Uttar Pradesh, Bihar

Citrus Maharashtra, Andhra Pradesh, Karnataka

Papaya Andhra Pradesh, Karnataka, West Bengal

Guava Bihar, Maharashtra, Karnataka

Grapes Maharashtra, Karnataka, Tamil Nadu

Pineapple West Bengal, Assam, Bihar

Apple Jammu and Kashmir, Himachal Pradesh, Uttaranchal

Litchi Bihar, West Bengal, Assam

Sapota Karnataka, Maharashtra, Tamil Nadu, Andhra Pradesh

Total fruits (inclothers)

Maharashtra, Andhra Pradesh, Tamil Nadu,Karnataka

Leading States: Vegetables

Potato Uttar Pradesh, West Bengal, Bihar Punjab

Brinjal West Bengal, Orissa, Bihar

Tomato Maharashtra, Karnataka, Bihar, Andhra Pradesh

Tapioca Tamil Nadu, Kerala, Andhra Pradesh

Cabbage West Bengal, Orissa, Bihar

Onion Maharashtra, Karnataka, Gujarat

Cauliflower West Bengal, Bihar, Orissa

Okra Bihar, Orissa, West Bengal,

Peas Uttar Pradesh, Jharkhand, West Bengal

Sweet Potato Orissa, Uttar Pradesh , West Bengal

Total veg. (incl others) West Bengal, Uttar Pradesh, Bihar Orissa

Big Companies: Fruit/Veggies Processing

Jam Hindustan Unilever, Mapro, Marico , Malas

PicklesPriya foods, Praveen, Desai Brothers, Cavin Kare, GDFoods

Sauce / Ketchup Hindustan Unilever, Nestle, Heinz

Juices / Fruit baseddrinks

Pepsi, Dabur , Parle, Godrej, Mother Dairy

Squashes Hindustan Unilever, Haldiram, Mapro

Ready to EatVegetables

Tasty Bite, ITC, MTR



Potato chips Pepsi

Cooking pastes Dabur, Hindustan Unilever

Big Companies: Chocolate business

Company brands of chocolate/chewing gum etc.

PerfettiBrooklyn, Big Babool, Alpenliebe, Center Fresh, Chlor Mint, Golia,Cofitos

Parry’s/Lotte

Coffy Bite, Lacto king, Coconut punch, Caramilk, Madras Cafe, Soft-Spot, Flavoured Candy, Mango, Sunshine, Shakti, Pineapple

Parle’sMelody, Mango bite, Kismi, Poppins, Rola cola, LuxDairy,Peppermint, Rosemint

GDC/Joyco

Boomer, Bonkers, Donalds,PimPom, Mickey,Bonkers

CandicoMinto, After smoke, Candy king, Americano, Orange-tutti frutti,Drum Beat, Vanilla Roll, Elaichi roll, Big Freedom, Jumbo-Gumbo,LocoPoco, Minto-Fresh

Ravalgaon Pan pasand, Mango mood, Coffee breakSupreme,

Nestle Polo, Allen’s Splash, Soothers, Toffo Butter, Fruit Rings, Fox’s

Cadbury’s Googly, Mocka, English toffee, Frutus, Gollum, Eclairs, Pops.

Next time we see upstream downstream issues related to milk-meat-marine, tea-coffee-liquor-oil etc.

URL to article: http://mrunal.org/2013/08/food-processing-supply-chain-management-upstream-downstream-requirements-for-fruit-vegetables-confectionery-industries.html

Posted By Mrunal On 29/08/2013 @ 18:42 In the category Economy

mrunal [food processing] supply chain management, upstream downstream requirements for fruit &...

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