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India holds 2nd largest arable land in the world. With 20 agri-climatic regions, all 15 major climates in the world exist in India. The country also possesses 46 of the 60 soil types in the world
India is the largest producer of pulses, milk, tea, cashew and mangoes, buffalo meat; and the second largest producer of tea, wheat, sugarcane and rice
Globally, India has the largest livestock population of 470 million, which includes 205 million cattle and 90 million buffaloes
Consumption expenditure is likely to reach USD3.6 trillion by 2020, up from an estimated USD1.0 trillion in 2010.
Strategic geographic and proximity to food importing nations, makes India favourable for export of processed foods
2009
2020E
Domestic food spending: USD318 billion
Advantage India
Increasing investments
Government expects USD21.9 billion of investments in food processing infrastructure by 2015 Investments, including FDI, will rise with strengthening demand and supply fundamentals Launch of Infrastructure Development scheme to increase investments in food processing infrastructure
Policy sector support The engineering is delicensed; 100 per cent FDI is allowed in the Sops to private sector participation; sector 100 per cent FDI under automatic route Due to policy support, there was Agri Export Zones have been set up; cumulative FDI of USD14.0 billion into under the governments Vision 2015 the sector over April 2000 February plan, mega food parks to be 2012, making up 8.6 per cent of total established FDI into the in that period Approval of country National Mission on Food Processing
Notes: 2020E Estimate for 2020; Estimates are from Flavours of Incredible India (Ernst & Young, 2009) FDI Foreign Direct Investment
With 127.3 MT in FY12, India is the largest producer of milk in the world
India is the largest producer of buffalo meat (1.5 MT*) and the second largest producer of goat meat (0.6 MT*)
With 8.9 MT production in FY12, India is the second largest producer of fish in the world
Grain processing
Consumer food
Source: Indiabusiness.nic.in, Ministry of Agriculture, APEDA, Meat & Poultry Processing Board, FAOSTAT Note: FY Indian Financial Year (April March) MT - Million Tonnes, * - Data mentioned is for FY12
Packaged food
Alcoholic beverages
The food processing industry is among one of the largest industries in India and ranks 5th in terms of production, consumption and exports With an estimated value of USD121 billion in FY12, Indias food processing industry accounts for 32 per cent of the total food market
Grain Mill products Other Beverages 20% 91% 11% 5% Other food products
Source: Ministry of Food Processing Industries ( MOFPI), Annual Report MOFPI (2012-13), Aranca Research
Inputs
Production
Processing
Retailing
Key activities
Major players
Source: Ministry of Food Processing Industries ( MOFPI), Aranca Research. Note: NCMSL - National Collateral Management Services Limited
During FY06-11, the food processing industry expanded at a CAGR of 4.8 per cent; in FY11 alone, the industry grew 7.1 per cent Food processing is an important segment in terms of contribution to GDP, and share in the agriculture and manufacturing sectors In FY11, India had as many as 35,838 registered food processing units with total capital investment of approximately USD52.1 billion According to MOFPI in FY11, capital investments in Indias food processing sector have increased a significant 28.6 per cent over the last year
8.0%
13.0 6.0% 4.0% 12.0 2.0% 11.0 0.0% -2.0% 10.0 FY07 FY08 FY09 FY10 FY11
Growth - right axis GDP- Food processing industry
-4.0%
Source: Ministry of Food Processing Industries ( MOFPI), Annual Report MOFPI (2012-13), Aranca Research
Although figures for output of food products and beverages from ASI are not available post FY10, data from the Index of Industrial Production (IIP) suggest strengthening growth momentum in food products and beverages in FY11-12 Growth for food products and beverages shot up to 14.8 per cent in FY12 from 8.9% in FY11; the sector was the second-fastest growing sub-segment within manufacturing in FY12 and its growth far outpaced that of the overall manufacturing sector in the fiscal year
5
0 FY06 FY07 FY08 FY09 FY10 FY11 FY12
-5 -10 Annual growth of Food products & beverages as per IIP Annual growth of overall manufacturing sector as per IIP
The unorganised sector accounts for 42 per cent of Indias food processing industry The sizeable presence of small scale industries points to the sectors role in employment generation
25%
Organised sector
42%
Source: Ministry of Food Processing Industries ( MOFPI), Annual Report MOFPI (2012-13), Aranca Research
Rice mills account for the largest share of processing units in the organised sector The governments focus on infrastructure is likely to see a sharp rise in the number of cold storage units in the years ahead
30% 50%
70% 50%
In FY09, the sector employed 48 million people Policymakers have identified the food processing sector as a key one in encouraging labour movement from agriculture to manufacturing
Healthy contribution to employment generation (FY09) Direct employment (13 million) Food processing industry Indirect employment (35 million)
Wide array of products, coupled with increasing global connectivity has led to a change in the tastes and preference of domestic consumers This trend has been bolstered by rising incomes, increasing urbanisation, a young population, and the emergence of nuclear families
Liberalisation and growth of organised retail have made the Indian market more attractive for global players With a large agriculture sector, abundant livestock, and cost competitiveness India is fast emerging as a sourcing hub of processed food
Companies have been moving up the value chain; for example, cooperatives are transitioning from being pure producers of milk to offering a wide range of dairy products Firms, both domestic and global, have been focussing on product innovation to cater to domestic tastes, while also introducing international flavours
Strategic geographic location and continuous increase in production of raw materials helps India to supply cheaper products to other countries Indias exports of processed food and related items rose at a CAGR of 27.3 per cent during FY0812
Notes: FY Indian Financial Year (April March)
Alcoholic beverages
Consumer food
Packaged food
Strong domestic
Supply-side advantages
Policy support
Mega food parks, Agri Export Zones to attract FDI and aid infrastructure
1,800
1,500 1,200 900 600 300
Growth
40%
35% 25% 12% 1% 2% 3% 6%
29%
17% 7%
2008
Income segment
Globals (>22065.3) Seekers (4413.1 - 11032.7) Deprived (<1985.9)
2020
2030
Strivers (11032.7 - 22065.3) Aspirers (1985.9 - 4413.1)
154
FY07
FY08
FY09
FY10
FY15E
FY07
FY08
FY09
FY10
FY15E
388
359 373
403 243
263
284
307
FY07
FY08
FY09
FY10
FY15E
FY07
FY08
FY09
FY10
FY15E
Source: Ministry of Food Processing Industries, Aranca Research. Note MT is Metric Tonnes
During FY08-12, India's exports of processed food and related products increased at a CAGR of 27.3 per cent to USD24.0 billion Main export destinations for food products have been the Middle East and South East Asia
24.0
CAGR: 27.3%
14.0 10.9
10.7
10.7
FY08
FY09
FY10
FY11
FY12
Source: Ministry of Food Processing Industries, Aranca Research; Notes: FY Indian Financial Year (April March)
2,329
2,300 1,915 1,253 858 1,154 305 505 50 1,106 746 488
682 244 78 53
659
Guargum
Basmati rice
Buffalo meat
FY10
Other cereals
FY12
Groundnuts
Source: Ministry of Agriculture, APEDA, Aranca Research Notes: FY Indian Financial Year (April March)
Supply-side advantages
Growth in food product exports has been aided by Significant improvements in product and packaging quality Greater private sector participation India has a location advantage it is geographically close to key export destinations (Middle East, South East Asia) The US and the UAE are the top destinations for Indias exports of processed food and agriculturerelated products, followed by Vietnam and Saudi Arabia
Top ten destination countries of Indias exports of processed food and agriculture related products in FY12 (USD million)
3,061
1,490 1,402
1,171 852
795
734
576
406 396
Bangladesh
Viietnam
Indonesia
Iran
Saudi Arabia
Malasiya
Nigeria
USA
UAE
Kuwait
In FY11, APEDA products had 41.6 per cent share in total exports; non-APEDA products made up the rest Within APEDA products, cereals had the highest share (36 per cent) while for non-APEDA products marine products dominated with a share of about 21 per cent
36%
35% Processed Fruits & Vegetables Other processed foods Fresh Fruits & Vegetables 5% 17% Floriculture & Seeds
11%
Oil Meals
Spices 14% 20% Tea & Coffee 20% Others
Indias comparative advantage lies in its favourable climate, large agriculture sector and livestock base, long coastline, and inland water resources India also has an edge in cost of production compared to its competitors in Asia and the developed world
Milk (Cow & Buffalo) Pulses (nes)
16.9%
19.7% 42.8% 27.8% 39.0% 23.0% 23.6% ~24.0% ~10.0%
1
1 1 1 1 2 2 2 2
Units Arable land (million hectares) Area under Irrigation (million hectares) Coast line ('000 kilometers) Cattle (million)
157.9
Global rank
2*
63.1
1*
7.5 205.0
18**
Sugarcane
1**
Wheat
Source: World bank, FAOSTAT, CIA World Fact book, Aranca Research Notes: * - For the year 2009; ** - For the year 2012
100 per cent export-oriented units are allowed to sell up to 50 per cent of their produce in the domestic market Export earnings are exempted from corporate taxes
Import duty scrapped on capital goods and raw materials for 100 per cent export-oriented units 100 per cent tax exemption for 5 years followed by 25 per cent tax exemption for the next 5 years for new agro-processing industries Full excise duty exemption for goods that are used in installation of cold storage facilities
100 per cent FDI under automatic route (except for alcohol, beer, and sectors reserved for small scale industries) Repatriation of capital and profits permitted
Source: Ministry of Food Processing Industries, APEDA, Aranca Research Notes: FDI Foreign Direct Investment
Focus on infrastructure
Assigned priority sector for bank credit 60 Agri Export Zones (AEZ) have been set up across the country According to Vision 2015, formulated by MoFPI, the government plans to establish 30 mega food parks in public-private partnership mode across the country; out of these 10 have already been approved in the first phase Government has also announced setting up of 15 Mega Food Parks in its FY12 Budget, as part of the third phase of Mega Food Park Scheme
Investment-linked tax incentive of 100 per cent deduction of capital expenditure for setting up and operating cold chain facilities (for specified products), and for setting up and operating warehousing facilities (for storage of agricultural produce)
The government launched initiatives such as for the Setting Up/Upgradation of Quality Control/Food Testing Laboratory, R&D and Promotional Activity scheme and the Technology Upgradation/Setting Up/Modernisation/Expansion of Food Processing Industries Scheme
Source: Ministry of Food Processing Industries, APEDA, Aranca Research
Uttaranchal: Basmati rice, aromatic and medicinal plants Jammu & Kashmir: Apples, walnuts Himachal Pradesh: Apples
Assam: Ginger
Punjab: Basmati rice, vegetables Rajasthan: Coriander, cumin Gujarat: Mangoes, vegetables, sesame seeds
West Bengal: Pineapple, litchi, Darjeeling tea, vegetables Madhya Pradesh: Onions, garlic, seed spices, lentils Maharashtra: Grapes, grape wine, mangoes, flowers, onion Andhra Pradesh: vegetables, mango pulp, grapes, gherkins Karnataka: Gherkins, rose, onions, flowers, vanilla Tamil Nadu: Flowers, mangoes, cashew nuts
Source: APEDA, Aranca Research
Between April 2000 and January 2013, FDI in agriculture and food processing in India stood at USD5.2 billion Demand growth, supply advantages, and policy support have been instrumental in attracting FDI
Cumulative FDI inflows (Apr 2000Jan 2013) into the food and agriculture sector (USD million)
2,000 1,600 1,200 800 385 400 0 Agri services Agri machinery Fermentation Food processing Vegetable oil Tea and Coffee Sugar 223 101 52 0% 10% 1,489 1,801 40%
30%
1,135 20%
Cumulative FDI inflow (USD million) Share of total FDI inflow (%) - right axis
The governments main focus is on supply-chain related infrastructure like cold storage, abattoirs and food parks
5.5%
36.3%
45.4%
Source: Ministry of Food Processing Industries (2009-10 Annual Report), Aranca Research
PE investments in the food and agriculture totaled USD229 million during 2011-12
Company
Godrej Agrovet Nuziveedu Seeds Temasek Blackstone Group Actis Private Equity Sequoia Capital IDFC Darby Asia Investors Standard Chartered Pvt Eq Ltd Carlyle Group Motilal Oswal Private Equity Advisors Verlinvest SA Motilal Oswal Private Equity Advisors IL&FS Investment Managers Coffee
Investor
Type of business
Agribusiness Floriculture Dairy Snacks Dairy Non-citrous fruit farming Rice milling Milk production General food products Wine and liquor Dairy products Coffee and tea
Nilgiris Dairy Prakash Snacks Pvt Ltd Parag Milk & Milk Products Amalgamated Beans Coffee Trading Co Bush Foods Overseas Pvt Ltd Tirumala Milk Products The CREMICA Group Nashik Vinters Parag Milk & Milk Products Godrej Tea
M&A activity
Target company
United Spirits Ltd
Acquirer company
Relay BV EID Parry NSL Sugars Ltd
Type of business
Liquor Sugar Sugar
Sugar
Seasonings, sauces Agricultural seeds Sugar, ethanol Liquor Food and Beverage Candy items
73.8
35.0 30.0 14.1 14.0 14.0 11.2
Source: Thompson One Banker, Aranca Research Notes: M&A Mergers and Acquisitions
Players like McCormick had identified India as a strategic market way back in the 1990s Global players like Hershey are now keen on entering the increasingly attractive Indian market Established players like Nestle and Coke are extending their global JVs to India
Foreign Players
Molson Coors
Dan Cake McCormick McCormick Nestle, Coca Cola
Indian Partner
Cobra India
Phadnis Group Kohinoor Foods Ltd Eastern Condiments -Godrej AVT
Type of business
Brewing
Cake and biscuits Basmati and food products Seasonings Beverage Chocolates Spices
Stake ratio
NA
66:34 85:15 26:74 50:50 51:49 50:50
Year
2011
2011 2011 2010 2010 2007 1994
Hershey
McCormick
Operation Flood was initiated in 1970 by the National Dairy Development Board to achieve national self sufficiency in milk production by creating nationwide milk grids; under Operation Flood Indias milk production rose to 127.3 million metric tonnes (mmt) in FY12 from 21.2 mmt in FY1969 India retained its position as the worlds largest milk producer in 2011-12 Dairy cooperatives offer employment opportunities to about 12 million farm families
Members (million)
1.8
3.6
9.3
Milk procurement (million kg/ day) Liquid milk marketing (million litres/ day) Milk drying capacity (million tonnes/ day)
2.6
5.8
11.0
2.9
5.0
10.0
261
507.5
842
Gujarat Cooperative Milk Marketing Federation (GCMMF) is the largest food products marketing organisation in India Set up in 1967, it is Indias largest exporter of dairy products and has been accorded trading house status
2.4
CAGR: 20.8%
1.7 1.5 1.3 0.9
2.1
FY07
FY08
FY09
FY10
FY11
FY12
Source: GCMMF (www.amul.com), Aranca Research Notes: CAGR Compound Annual Growth Rate FY Indian Financial Year (April March)
Main brand: Amul Products: milk (including flavoured), butter, margarine, cheese, curd, desserts, infant food
NOTABLE AWARDS
Authority APEDA
3.18
16,117 13.67 3.88 10.6 647
Excellent performance in dairy product exports for 11 consecutive years CIO International IT Excellence Award (2003) for positive business performance through resourceful IT management and best practices International Dairy Federation Marketing Award (2007) for Amuls pro-biotic ice cream launch
One of the worlds fastest growing FMCG company Acquisitions of companies and plats facilities Focus on R&D Aggressive acquisitions of lands for soya and palm plantations Strong brands like Nutrela and Vansapati and Sunrich
Top edible oil producer in India with market share of 18.2 per cent
Focus on developing upstream business; secured access to 185,000 hectares of palm plantation; major expansion of refining capacity 2008-12
Source: Ruchi Soya website, Aranca Research
2001-04
2005-08
Salient characteristics KRBL is worlds largest rice miller and basmati rice exporter It has strong brand presence through global retail giants like Carrefour, Bharti-Walmart, Spencer and Future Group It is the largest producer of contract farming basmati rice in the world The company accounts for 25 per cent of Indias total exports of branded basmati rice KRBL is well-integrated in terms of farming, rice processing, oil production and power generation
178.2
CAGR: 33.4%
FY08
FY09
FY10
FY11
FY12
9M FY13
FY11
FY12 Source: Company Annual Report, Aranca Research Note: KRBL - Khushi Ram and Behari Lal
Fragmented market leads to lower processing levels and value addition The government plans to raise value addition to 35 per cent by 2015 (from 20 per cent in 2005) PPP modules ideal for the private sector Strong demand growth household consumption set to double by 2020
Global supermarket majors are looking at India as a major outsourcing hub India enjoys favourable supply-side fundamentals (abundant raw materials supply, cost advantages) The government has helped by investing in AEZs, mega food parks, easier credit
Both firms and the government are eager to boost efficiency and access to markets Investment potential of USD22 billion in food processing infrastructure; 100 per cent FDI in this area Firms increasingly taking recourse to contract farming in order to secure supply
Notes: PPP Public Private Partnership, AEZ Agri Export Zones, FDI Foreign Direct Investment
Governments focus and launch of various schemes to provide excellent infrastructure facility in food processing sector opens up various opportunity for private investors Various schemes launched by government provides capital grant, subsidy, duty free export of products and tax incentives to the investors
Fund allocated for infrastructure development in food processing industry (USD million)
Project wise fund allocated in 12th Five Year Plan (USD million)
CAGR: 27.2%
544.4 349.0 Scheme for Integarted Cold Chain 677.0 Scheme for Modernsiation of Abattoirs 11th Five Year Plan 12th Five Year Plan
Notes: PPP Public Private Partnership, AEZ Agri Export Zones, FDI Foreign Direct Investment
AEZ: Agri Exports Zones MFP: Mega Food Parks CAGR: Compound Annual Growth Rate FDI: Foreign Direct Investment MT: Million Tonnes IIP: Index of Industrial Production FY: Indian Financial Year (April to March) So FY12 implies April 2011 to March 2012 GOI: Government of India INR: Indian Rupee PPP: It could denote two things (mentioned in the presentation accordingly) Purchasing Power Parity (used in calculating per-capita GDP) Public Private Partnership (a type of joint venture between the public and private sectors)
PE: Private Equity APEDA: Agriculture & Processed food products Export Development Authority GCMMF: Gujarat Cooperative Milk Marketing Federation USD: US Dollar Wherever applicable, numbers have been rounded off to the nearest whole number
2007-08
2008-09 2009-10 2010-11 2011-12 2012-13
40.24
45.91 47.41 45.57 47.94 54.31
2009
2010 2011 2012 2013
46.76
45.32 45.64 54.69 54.45
Average for the year
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