Traditionally, the Indian life style has a predilection for fresh fruits and vegetables or those processed at home.

There is a sea change. People, are now increasingly going in for fresh fruit vending from kiosk fountains, which produce instant juices from fresh fruits in the presence of the consumer. It could be due to the non-availability of hygienically produced and wellpreserved products with the use of preservatives. That is why some of the real but branded fruit juices launched in the late 1980s and early 1990s did not succeed.

There has been a steady rise in the capacity, production and capacity utilisation in the fruit processing units. The processing capacity had gone up from 0.9 mn tonnes in 1990-91 to 2.1 mn tonnes in 1999-00. The capacity utilisation improved from 31% to 47%, with the production in 1999-00 estimated to have increased to 980,000 tonnes. The official reports do not show any substantial increase in total output although branded drinks do show a healthy improvement. There is no general acceptance of the product forms in the fruit drinks market. The consumer is basically concerned that it is a fruit juice and not a synthetically constituted product. Accordingly, the first segmentation is between real fruit drinks and synthetic drinks. The former are based on natural fruit pulp or juice. The others are synthetic products containing fruit flavours. Among the fruit juice beverages are fruit juices (Pepsi's Tropicana), nectars (Dabur's Real) and fruit drinks (Frooti and Slice). All these are real, reconstituted from fruit pulps or concentrates. The leading fruit juice brands include Real, Onjus, Tropicana, Frooti, Jumpin. The fruit drinks are mainly based on oranges, mangoes, pineapples, grapes, apples, guava and tomato. They only differ in pulp content: the juices have over 85%, nectars (20% to 85%) and fruit drinks (less than 20%).

The branded fruit juices market inclusive of nectars is placed at about Rs 10 bn. The pure fruit juices are the preferred drink among the fruit drinks. This segment is growing at around 10% annually. The market for fruit juices is expected to grow to Rs. 7.50 bn by end 2009-10 from nearly Rs. 4.75 bn presently.

Consumption per capita of juices in India is very low. It is estimated at a fraction of a litre - 20 ml. China has attained a consumption level of 1500 ml. The consumption in India is basically an urban phenomenon. Nonetheless, it is gaining slow but steady penetration into the rural areas.

The early development of juice processing was led by co-operatives and other processors in the fruit-rich states of Himachal Pradesh and Punjab. The canned juice segment covered brands like NAFED, Noga, Midland, Gold Coin and Druk. These were fruit juices or nectars - not drinks. These did not make a mark in the market for whatever reasons: high price, unattractive packaging, and lack of right promotion programme. A bulk of juice consumption came from institutional commercial buyers. There was a sizeable export of mango pulp. It is now getting into the retail marketing basically as a funfood, often as a substitute for aerated and cola drinks.

In the area of packaging, Tetra-Pak India, a part of the $ 10 bn Tetra Laval group, has become the major source of brick cartons amenable to aseptic packaging and imparting long product shelf life to the foods. Tins, nonetheless still continue to be in the market in family size packings. A perceptible change came in 1996 with the introduction of Real juice in aseptic cartons from Dabur Foods. Packaged in tabletop packs from Elopak, Norway, the juices were claimed to have a six-month shelf life. Real fruit juice is the first brand in Asia to use the latest Spin Technology developed by TetraPack. It is available in five flavours - orange, mango, pineapple, mixed fruit and tomato. It also plans to export Real to South East Asia, Bangladesh and Sri Lanka.

Enkay Texofood Industries entered the market with what is claimed as 100% natural orange juice in India with Onjus brand. Enkay happens to be the largest Indian exporter of fruit juices, pulp and concentrates to Europe and North America, with clients such as Unilever, Coke, Pepsi and Nestle. The company's plants near Vapi in Gujarat have been producing daily 80,000 packs of 250 ml and 70,000 packs of one litre of Onjus. By the end of 1999, Onjus had captured at a point of time third of the juice market.

Until the advent of Tropicana, Real remained a premium product. Dabur Foods marketing strategy paid off until Onjus was sold at almost half the Real's price and claimed to be a 100% natural drink. Tropicana Product, a division of PepsiCo, entered the Indian market. For the Indian markets, Tropicana developed a sweeter blend of orange and white grape. Tropicana was planning to enhance its market share in the fruit juice market and to increase its turnover to Rs 1000 mn by 2002-03. PepsiCo International is planning to make India a regional sourcing hub for fruit juice concentrates and pulp. Pepsi Foods is already exporting nearly 20,000 tonnes of mango pulp and concentrate mainly to West Asia and Europe. It has launched a new mango juice and was to introduce guava and litchi variants.

The segment has been witnessing some feverish developments. Pepsi was exploring the launch of a new brand in the segment the first international juice brand in the category launched in India. It had already decided to launch other flavours of Maaza and beverages like iced tea and coffee. It is planning to repack its five-flavour offering for the Indian consumer. The company stopped the production of the 250 ml pack. The new flavour - sweet orange - was being targeted at customers who were not used to the regular orange flavoured juice, which Tropicana sells worldwide. While Tropicana came up with mixed fruits, Pepsi ventured into slice mango juice in Tetrapak along Tropicana. Tropicana also explored the possibility of local production of juices from mango. It planned to source raw processed fruits, such as apples from Himachal Pradesh, grapes from Sholapur and tomatoes from Punjab.

Dabur Foods has launched Real Junior, a 125 ml pack of apple and mango drinks for children below 6 years of age. The company has also started test marketing of tomato soup under the homemade brand. Dabur Foods, a Rs. 860 mn company, is planning to achieve a sales turnover of Rs. 5 bn in the next five years. During the period 2003-04, the company, for the first time since its spinning off into a separate company, logging a net profit of Rs. 150 mn on a turnover of Rs. 850 mn. Coca-Cola and Procter & Gamble were contemplating a stand-alone juices and snacks company. Coke had a setback in its deal with Quaker Oats, owner of sports drinks,

Gatorade, being acquired by Pepsi. Coca-Cola was introducing powdered drink concentrate Sunfill Fresh, especially in the rural market place.

Pioma Industries, the maker of Rasna brand of soft drink concentrate, was negotiating a joint venture with Del Monte Foods of the USA. Del Monte is the largest producer of canned fruits and vegetables in the US. Rasna has set up its first production unit in Himachal Pradesh, with an installed capacity of 350,000 cases a year. The company has plans for setting up two more units with a combined capacity of 600,000 cases a year. To increase its market share the company is planning to introduce local flavours like shikanjvi, aam panna, and jal jeera. Rasna sachet sales have grown to contribute 30% of its sales in terms of volume. Rasna International is set to face renewed competition from the relaunched Tang brand from Kraft General, which is now a part of the Philip Moris group. The international brand was launched earlier in India by Kothari General Foods.

The Prakash Chauhan-controlled Parle Agro was to launch two new fruit beverages, besides widening its product portfolio by getting into jams and ketchups. The poduction units were planned in Maharashtra. The company slashed the prices of Frooti and Appy to gain market share. Merisant India, a subsidiary of Merisant USA and makers of Equal, the low calorie sweetener, has introduced a powdered soft drink under the brand, Fix, in the Indian market. The drink is low in calories and will be sold in different flavours - peach, orange, mango, pineapple and lemon.

Fruit Beverages and Squashes and Syrups Fruit Juices and Concentrates Demand: Past & Future Year 1990-91 1991-92 Rs bn 0.22 0.3

1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2014-15

0.42 0.63 1.03 1.62 1.68 2.20 3.30 2.75 2.48 3.55 3.95 4.35 4.80 5.30 5.80 6.30 6.85 7.40 10.90

Squashes and Syrups Demand: Past & Future Year 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 MT 12 13 20 21 23 35 40 46

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2014-15

52 58 65 72 80 88 96 105 113 122 130 139 177

Market Growth Rates FJC 1990-91 - 1996-97 1996-97 - 2001-02 2001-02 - 2006-07 2004-05 - 2009-10 2009-10 - 2014-15 40.3% 16.1% 10.3% 9.0% 8.0% SS 22.2% 12.5% 9.4% 7.7% 5.0%

Sensitivity Coefficient Fruit Juices /Pulps /Concentrates Squashes and Syrups 7.6% 6.0%

Market Structure Product Variation Type Share (%)

RTS beverages Pulp/Concentrate Fruit juices Squashes

47 40 6 7

Lead Players Company Foods & Inns Dynamix Dairy Godrej Foods Keventer Agro Bhilai Engg Corp. Frigerio Conserva Allana Vinsari Fruitech Share (%) 20 10 9 8 6 5 4

Market Segmentation Segment North East West South Share (%) 8 7 20 65

Leading Brands Vadilal, Jumpin, Kissan, Real, Onjus, Kool Kokum, Frooti, Appy, Joly Jely, Yo Fruity, Noga, Midland, Goldcoin, Druk, Tropicana.

Friut and vegetables

Fruits & Vegetables

The installed capacity of fruits and vegetables processing industry has increased from 1.1 million tonnes in January 1993 to 2.1 million tonnes in 2006. The processing of fruits and vegetables is estimated to be around 2.2% of the total production in the country. The major processed items in the fruit and vegetable segment are fruit pulps and juices, fruit based ready-to-serve beverages, canned fruits and vegetables, jams, squashes, pickles, chutneys and dehydrated vegetables. Some recent products introduced in this segment include vegetable curries in retortable pouches, canned mushroom and mushroom products, dried fruits and vegetables and fruit juice concentrates.

The fruits and vegetable processing industry is highly decentralized, and a large number of units are in the cottage, household and small-scale sector, having small capacities of up to 250 tonnes per annum. Since 2000, the food processing industry has seen significant growth in ready-to-serve beverages, fruit juices and pulps, dehydrated and frozen fruits and vegetable products, pickles, processed mushrooms and curried vegetables, and units engaged in these segments are export oriented.

Exporters Of Fruit & Vegetables

(Quantity in MT, Value in Rs Mn) 2001-02 Quantity Value Dried & Preserved Vegetables 209157.8 5371.5 Mango Pulp 76735.18 2413.4 Pickles & Chutney 38758.97 1203.4 Other Processed Fruits & Vegetables 61332.39 2017.4 Total 385984.3 11005.7 2004-05 Quantity Value 351034.3 7657.5 90988.6 3008.6 67193.29 1205.8 80760.5 2755.3 589976.7 14627.2 CAGR Quantity Value 18.8 12.5 5.8 7.6 20.1 0.1 9.6 10.9 15.2 9.9

Source: Ministry of Food Processing Industries, Annual Report 2005-06

The domestic industry has to change its preference in favour of processed foods. Consumption of value added fruits and vegetables are low compared to the primary processed foods, and fresh fruits and vegetables. The inclination towards processed foods is mostly visible in urban centers due to a high purchasing power.

A remarkable push can be given to this sector by strengthening linkages between farmers and food processors. The poor and weak linkage between farmers and markets, as well as, farmers and processing companies has brought about inefficiencies in the supply chain and encouraged the involvement of middlemen leading price rise to the products. The Government of Indias National Agriculture Policy envisages the participation of the private sector through contract farming and land leasing arrangements which not only assures supply of raw material for processing units, but also a market for agriculture produce, accelerate technology transfer and capital inflow into the agriculture sector.

Innovative practices like contract farming in wheat practiced in Madhya Pradesh by Hindustan Lever Ltd and by Pepsi Foods Ltd in Punjab for tomatoes, food grains, spices and oilseeds are some successful examples of contract farming in India, which changed the farming landscape and promoted the cultivation of processable variety of farm produce this will certainly power the fruits, vegetables and grain processing industry. Besides such initiatives, fiscal incentives and tax concessions will also give impetus to the sector. The five-year 100% tax exemption announced by the Government in the finance year 2005 was one such incentive for upcoming fruits and vegetable processing units.

Retail in Food Processing

The size of the Indian urban food market is estimated at Rs 350,000 crore. The domestic market for processed food is huge and fast growing. The retail boom will create a huge demand for the food-processing sector in the coming years. Little wonder that 2007 has been designated the Year of Food Technology.

The private sector is yet to realize its full potential in the food-retailing sector, as the market is still to explore. Though, it has now started discovering the money there is to be made in the urban food retailing market.

Assured Market Urban centres have the potential of development process. But they do not produce food as they lack agricultural land; on contrary the rural areas do. In that sense, the urban areas provide an assured market for the food produced by farmers. The urban food marketing system thus assumes considerable importance for both feeding the urban population and helping farmers.

There are certain distinct characteristics of urban food demand. The urban population generally has a higher purchasing power. The rising average income is leading to greater demand for high-value processed food. A considerable number of urban women work, creating a demand for heat-and-serve foods.

The urban population density is high and this demands a chain or a network of retail outlets. Indian food retailing is poised for a quantum leap. Not only are newer names set to dot the retail landscape but also such new formats, as hyper-and super-markets are to emerge.

The key drivers for increased demand in value-added processed food products are: a) growth in consumer class; b) change in lifestyle characterized by expanding urban population, increased number of nuclear and dual-income families; c) change in attitudes and tastes with increasing modernization and to a lesser extent westernization of tastes, particularly, of the youth; d) low penetration rates; and e) ability to offset seasonal supplyand-demand effects in fresh products.

It has been estimated that during the Eleventh Plan period, an investment of Rs 1 lakhcrore is expected in the food-processing sector. Realizing the need for a regulatory framework for the retailing sector, the government has merged 16 laws relating to the foodprocessing sector into one piece of legislation and this is expected to be put in place from the financial year 2007-08.

Stress on Marketing To tap into the huge market for processed foods, an efficient marketing system is necessary to bring about demand-driven production; marketing becomes the key to catalyzing agricultural development and with that fostering inclusive growth. Besides, it reduces intermediaries, increases farmers' realization and lowers consumer prices.

An efficient marketing system can reduce post-harvest losses, promote graded processing, packaging services and food safety practices, induce demand-driven production, enable high value addition and facilitate exports.

Marketing reforms are needed, as they are critical to development of the potential urban food demand. The National Commission on Farmers, headed by Dr M.S. Swaminathan, has suggested encouraging public-private partnership besides encouraging private sector investments to tap this huge potential.

At present, there are 7,521 regulated markets. Most of these lack critical infrastructure. Therefore, massive investment is needed to provide critical agricultural marketing infrastructure. It is estimated that at least Rs 12,234 crore is needed for the regulated markets. Initiative has to be taken to promote public-private partnerships as they ensure efficient resource utilisation and better management practices. There are many examples of successful public-private partnerships. Safal market in Karnataka is an instance of the modernisation of wholesale markets. ITC's e-Chaupal, Haryali Kisan Bazaar, Mahindra Subh Labh, Cargil Farmgate Business and Tata Kisan Sansar are all initiatives of marketing distribution in the PPP format. Besides, commodity exchanges and futures markets have come up in the form of National Commodity and Derivative Exchange Ltd (NCDEX) and Multi-Commodity Exchange Limited (MCX).

Incentives to Corporates

To encourage the private sector to make investments in marketing infrastructure on the required scale, a favourable regulatory environment needs to be created so as to attract large corporates.

This would include: a) liberalised credit norms to entrepreneurs for agricultural marketing activities; b) changes in the market regulatory framework to allow private entrepreneurs establish market yards and other regulatory facilities; c) changes in the co-operative laws to allow farmers' co-operatives to work along corporate lines and compete with private trade; d) review of several legal instruments to facilitate the entry of entrepreneurs in marketing activities; and e) provisions to allow private entrepreneurs to cover price and yield risks for farmers.

The emergence of organised retailing in recent years and the creation of quality retail space have led to an increased demand for quality produce and thereby investments in supply chain infrastructure by private players.

Reliance Initiative A visit to the fruits and vegetables stores of a leading corporate would reveal the depth and width of the market for processed foods. In fact, the company opened more than 17 such stores in one city alone. The company also plans to enter into agri-horticulture and the processed food sector. Subsequently, a subsidiary is to market agri-horticultural products across the country. Conceptually, the company is creating a virtuous circle of prosperity by bringing farmers and consumers together in a win-win partnership.

The retail business should partner with farmers, logistics operators and traders to enhance their purchasing power. A supply chain, logistics and information technology infrastructure would string the whole plan together.

Evolving System It has taken some time but finally it seems that the evolution of organised retailing in food products is on in India. Many retail start-ups promised a lot. But failed. Through trial and error, a sustainable business model is evolving. A significant number of new businesses are poised for a major surge.

Notably, private investments in marketing of processed food for urban centres have reached the inflection point with several large corporates beginning to invest significantly. Each of these retail businesses has created a sustainable model of its own. In fact, each has developed a model unique to the Indian context. The entry of large business conglomerates is likely to attract greater investments and create a cascading effect across the SME segment of the food and agri-space.

This coming of age for retailers in the organized retail sector augurs well for consumers and farmers in India.

India's Potential Untapped-Food Industry India is the world's second largest producer of food next to China, and has the potential of being the biggest with the food and agricultural sector. The processing food segment accounts for 29.4 billion, in a total estimated food market of about USD 91.7 billion. The food processing industry is one of the largest industries in India. It currently ranks fifth in terms of production, consumption, export and growth prospects.

The Confederation of Indian Industry (CII) has estimated that the food-processing sector has the potential of attracting USD 33 billion of investment in 10 years and generates employment of 9 million person-days. The Government has formulated and implemented several Plan Schemes to provide financial assistance for setting up and modernizing food processing units, creation of infrastructure, support for research and development and human resource development in addition to other promotional measures to encourage the growth of the processed food sector.

Though the industry is large in size, it is still at a nascent stage in terms of development. Of the country's total agriculture and food produce, only 2 per cent is processed.The highest share of processed food is in the dairy sector, where 37 per cent of the total produce is processed, of this only 15 per cent is processed by the organized sector.

India's food processing sector covers fruit and vegetables; meat and poultry; milk and milk products, alcoholic beverages, fisheries, plantation, grain processing and other consumer product groups like confectionery, chocolates and cocoa products, soya-based products, mineral water, high protein foods etc. We cover an exhaustive database of an array of suppliers, manufacturers, exporters and importers widely dealing in sectors like the food

industry, dairy processing, Indian beverage industry etc. We also cover sectors like dairy plants, canning, bottling plants, packaging industries, process machinery etc.

The most promising sub-sectors includes soft-drink bottling, confectionery manufacture, fishing, aquaculture, grain-milling and grain-based products, meat and poultry processing, alcoholic beverages, milk processing, tomato paste, fast-food, ready-to-eat breakfast cereals, food processing, food additives, flavours etc.

Government Initiatives The Government of India has identified the Food Processing Industry sector as a high priority area. It has given a number of fiscal relief and incentives to encourage commercialization and value addition to agricultural produce. As per a study conducted by McKinsey and Confederation of Indian Industry (CII), the turnover of the total food market is approximately USD 69.4 billion out of which value-added food products comprise USD 22.2 billion.

The Government has also approved proposals for joint ventures; foreign collaboration, industrial licenses and 100 percent export oriented units envisaging an investment of USD 4.80 billion during the same period. Out of this, foreign investment is over USD 18.2 billion.

India is also considering investing another USD 22.97m in at least 10 mega food parks in the country. The move is besides working towards offering 100 percent foreign direct investment and income-tax benefits to the sector. According to Indian Credit Rating Agency (ICRA), the processed food market accounts for 32 percent of the total food market.

Indianisation International fast food brands spice up their plans of entering India. Many like UK brand Dixy Chicken and pizza outlet Papa John's made their foray recently, Cinnabon and Barnie's will open their first store this year and a host of other brands, including SumoSalad and Panda Express, are scouting for local partners to tempt the Indian palate.

Fast-food retail chains such as KFC, McDonald's, Domino's, Pizza Hut and others are relearning marketing lessons and segmenting their product portfolio to capture Indian consumers across diverse income levels and lifestyles. The strategy is an attempt by some top retailers to tone up profit margins with a multi-layered product portfolio that addresses

the aspirational need of consumers willing to splurge while meeting the basic requirement at the bottom-end.

With cut-throat competition to set up standalone outlets at busy marketplaces getting tougher, fast-food chains have come up with a new recipe for success takeover and manage canteens across schools, colleges and corporate offices.

With global supermarket majors such as Wal-Mart,Tesco and Carrefour among others increasing sourcing of processed foods from the country, it makes monetary sense for local companies to enter/expand in this arena. In fact, Food Processing Minister Subhodh Kant Sahai had said at the beginning of the year that foreign retail giants are willing to buy as much as USD30 billion worth of processed food from the country.

Milk and Diary Products This segment needs a special mentioning. India's milk and milk products output (milk equivalent) growth is set to outpace the growth in the global market. While world milk and milk products output is expected to grow by 2.6 per cent again in 2006, India is expected to register up to 4 per cent increase. The country will account for nearly half of the expected 5 per cent growth in Asia.

As the largest single dairy producing country in the world, India's output continues to grow strongly in the 3-4 percent range, largely in response to internal demand growth and sustained by increasing productivity. India will account for nearly half the 226 million ton total milk output of Asia. Given recent high international prices, it has started to enter certain export markets, particularly for skimmed milk powder, and is expected to export 0.3 million ton dairy products of the total milk and milk products output of 98.9 million ton. In 2005, the country had produced 95.1 million ton of dairy products.

Amul is set to become the largest liquid milk brand in the world after the consolidation of Gujarat's milk cooperatives, which envisages bringing all district milk brands under the Amul umbrella brand. Until now, Amul's marketer GCMMF claims, it is Asia's largest milk brand.

The market of the Amul brand of liquid milk will increase by 3.6-3.8 million litre per day to 4.5-4.6 million litre a day, once the district-level milk brands are phased out. The market

size for Amul milk will increases further by 200,000 litres if sales from liquid milk in paper box packs are also added to pouched milk sales.

Meanwhile, the organized food retailing industry is likely to grow by 30per cent in the next five years and become a USUSD 2.4 billion industry by '10 from the current USD 562 million-USD 674 million, an industry expert said.

The country's seafood exports rose 11 per cent in dollar terms to USD 1.64 billion in 200506, helped by the increasing demand from the European Union, China and the West Asia. This is the first time seafood export from the country crossing the USD1.5-billion-mark. Last year, the exports stood at 1.47 billion.

Investments The food-processing sector needs investment of about USD 28-35 billion to meet the changing food demands in India, according to industry estimates. The outlay for the foodprocessing segment has been increased from USD 19.5m in '04-05 to USD 41.4 million in the next year, more than twice the earlier amount.

Foreign direct investment (FDI) in the country's food sector is poised to hit the USD 3-billion mark. In the last one year alone, FDI approvals in food processing have doubled.

Add to this the USD 55 million that has been invested in sugar and cooking oil companies, and you can see how the changing diet of upwardly mobile India along with the new mega food parks are becoming dishy to overseas investors. Foreign direct investment in food already beats the money being pumped into the far-more-glamorous hotels and tourism industry.

According to latest industry ministry data, the cumulative FDI inflow in food processing reached USD 2,804 million in March '06. In '05-06, the sector received approvals worth USD 41million. This figure is almost double the USD 22million approved in '04-05.

Foreign investors are keen in investing in the country. Recently, India has received an encouraging response from investors in the UK for establishing joint quality control testing facilities for agriculture products and establishing cold storage facilities in the country, Minister of State for Food Processing Industries Subodh Kant Sahai said.

Bon Appetite The total food production in India is likely to double in the next ten years and there is an opportunity for large investments in food and food processing technologies, skills and equipment, especially in areas of Canning, Dairy and Food Processing, Specialty Processing, Packaging, Frozen Food and Refrigeration and Thermo Processing. Fruits and Vegetables, Fisheries, Milk and Milk Products, Meat and Poultry, Packaged/Convenience Foods, Alcoholic Beverages and Soft Drinks and Grains are important sub-sectors of the food processing industry. Health food and health food supplement is another rapidly rising segment of this industry, which is gaining vast popularity amongst the health conscious.

In a bid to remove constraints in the way of investments in the sector, the Ministry of Food Processing Industries (MoFPI) is set to push for creating a favorable fiscal environment to induce venture capital and mutual funds to invest in different components of supply chain or in the entire chain. This follows the recommendations of a Rabo Bank study commissioned by the Ministry to unlock investments to the tune of USD 33.4 billion in this sector over the next 10 years.

Since the sector offers immense growth potential, a large number of multi national companies (MNCs) have entered India to take advantage of the opportunity. Unilever, Nestle, Pepsi and Cadbury are some of the big, successful overseas players in India that face strife from established Indian brands.

According to a recently published report by RNCOS, Indian Food Processing (2006), :"In next 3 years, the Indian food processing industry is anticipated to grow to 3 times its current size making India a key and consequential player in the food and agriculture trade. Despite being recognized as a promising growth area, the current share of Indian food processing market in the world food trade is only 2 percent."

The food processing and bakery products sector has given the stock markets something to munch on. Stocks of major players in this slow-moving sector have been performing well on good corporate results, helpful economic conditions and good weather. Although thin margins will call for increased volumes for these companies to remain afloat two years down the line, the long-term prospects are still good because opened-up rural markets and an ever-expanding consumer base will ensure volumes.

Major Players Godrej Foods, Reliance, Namdhari, ITC, Nestle, Ruchi Soya Industries, Tata Coffee, Tata Tea, RPG group, Subhiksha.

Retail sector pushes for reforms in food processing

According to The Times of India, New Delhi dated February 09, 2007: Major players in the retail sector are pushing hard for abolition of or amendment to the Agricultural Produce Marketing Commission Act to speed up growth in the food processing industry, which is expected to bring in a major chunk of their moolah.

Global consultants Dun & Bradstreet last year estimated that India wastes roughly $13 billion worth of farm products, including dairy items, annually because of inadequate processing and cold-storage facilities. A FICCI study now says that despite being the secondbiggest food producer in the world after China, India's share in the $6.2-billion global processed food market stands at less than 1 %, leaving a huge scope for growth.

The study identifies the APMC Act as one of the major hurdles impeding growth as it does not allow processing units to store fruits or vegetables for more than a month.

This hampers firms that deal in seasonal produce like mango or litchi. Noting that Bihar has led the growth strategy by abolishing the Act, and several other states are following suit, the study says the system of seeking licences for each item being prepared by the same unit should also be scrapped.

The study also suggests a 10-year tax holiday, excise relief, fiscal incentives for cold-chain setups and a regulatory mechanism. Special incentives have been suggested for investors who enter all levels of processing industry in an integrated manner and for those providing one or more services. An excise exemption has also been sought on equipment and refrigerated trucks to attract investments and keep prices down.

Available data pegs Indian food exports in 1998 at $5.8 billion against a world total of $438 billion. At the start of 2000, the Indian food industry had a turnover of Rs 140,000 crore.

This indicates a vast scope for both investors and exporters. India processes only 2% of the fruits and vegetables it produces annually.

Why to invest in Food Processing Sector 1. Vast source of raw material

y y

India is one of the largest producers of wheat and rice. Coconuts, cashew nuts, ginger, turmeric and black pepper is widely grown in some parts of the country.

India is the second largest producer of groundnuts, fruits and vegetables. That it accounts for about 10 per cent of the world's fruits production with the country topping in the production of mangoes and bananas.

Due to the high processing levels milk products offer a significant opportunity in India. India is the world's largest producer of milk owing to the strong business models formed through cooperative movements in the country. Milk and related products account for 17% of India's total expenditure on food. This segment enjoys liberal regulations as all milk products except malted foods are automatically allowed 51% foreign equity participation and all exports of dairy products are freely allowed.

Alcoholic beverages have been categorised as the new high opportunity sector in India. Liquor manufactured in India is categorised as Indian Made Foreign Liquor (IMFL). The sector is still barred from the import of potable alcohol as it is subject to government licensing. In the meanwhile, India has recently started producing wine for domestic consumption.

Meat and poultry has also gained popularity due to the emergence of producers that have integrated breeding, feed milling, contract growing and marketing facilities for improved productivity. Meat, fish, and poultry are in rural areas as they are easily affordable and provide necessary nutrients. India has the potential to be a leading global food supplier if it employs the right marketing strategies and creates an efficient supply chain

2. Conventional farming to commercial faming In recent years, there has been a shift from conventional farming of food grains to horticulture which include fruits, vegetables, ornamental crops, medicinal and aromatic plants, spices, plantation crops which include coconut, cashew nuts and cocoa and allied activities

3. Market in the form of large urban middle class

With a huge population of 1.08 billion and population growth of about 1.6 % per annum, India is a large and growing market for food products. Its 350 million strong urban middle class with its changing food habits poses a huge market for agricultural products and processed food.

4. Low Production cost The relatively low-cost but skilled workforce can be effectively utilised to set up large, low-cost production bases for domestic and export markets.

5. Change in consumption patterns Increasing incomes are always accompanied by a change in the food habits. Over the last three decades in India a shift in food habits have been observed. The report observes that the proportionate expenditure on cereals, pulses, edible oil, sugar, salt and spices declines as households climb the expenditure classes in urban India while the opposite happens in the case of milk and milk products, meat, egg and fish, fruits and beverages.

For instance, According to report of ICRA the proportionate expenditure on staples like cereals, grams and pulses declined from 45 per cent to 44 per cent in rural India while the figure settled at 32 per cent of the total expenditure on food in urban India.

A large part of this shift in consumption is driven by the processed food market, which accounts for 32 per cent of the total food market. It accounts for US$ 29.4 billion, in a total estimated market of US$ 91.66 billion. The food processing industry is one of the largest industries in India -- it is ranked fifth in terms of production, consumption, export and expected growth.

According to the Confederation of Indian Industry (CII) the food-processing sector has the potential of attracting US$ 33 billion of investment in 10 years and generate employment of 9 million person-days.

6. Government Assistance The Government has introduced several schemes to provide financial assistance for setting up and modernizing of food processing units, creation of infrastructure, support for research and

development and human resource development in addition to other promotional measures to encourage the growth of the processed food sector.

7. Foreign Direct Investment Foreign direct investment (FDI) in the country's food sector is poised to hit the US$ 3-billion mark in coming years. FDI approvals in food processing have doubled in last one year alone. The cumulative FDI inflow in food processing reached US$ 2,804 million in March '06. In '05-06, the sector received approvals worth US$ 41 million. This figure is almost double the US$ 22 million approved in 2004-05.

The US-based private equity fund, New Vernon Private Equity Limited (NVPEL), has decided to invest Rs 45 crore in Kochi-based spice major, Eastern Condiments, which is the flagship company of Eastern Group.

America's largest chocolate and confectionery-maker Hershey is acquiring 51 per cent stake in Godrej Beverages and Foods for US$ 54 million.

8. Food Parks In an effort to boost the food sector, the Government is working on agri zones and the concept of mega food parks. Twenty such mega parks will come are proposed across the country in various cities to attract Foreign Direct Investment (FDI) in the food-processing sector.

The Government has released a total assistance of US$ 23 million to implement the Food Parks Scheme. It has so far approved 50 food parks for assistance across the country. The Centre also plans US$ 22 billion subsidy for mega food processing parks.

9.Conducive food processing policy environment The national policy on food processing aims at increasing the level of food processing from the present 2 per cent to 10 per cent by 2010 and 25 per cent by 2025. The government has allowed 100 per cent FDI in processing sector.

The Policy will seek to create an appropriate environment for entrepreneurs to set up Food Processing Industries through:
y

Fiscal initiatives and interventions like rationalization of tax structure on fresh foods as well as processed foods and machinery used for the production of processed foods.

A concerted promotion campaign to create market for processed foods by providing financial assistance to Industry Associations, NGOs/Cooperatives, Private Sector Units, State Government Organization for undertaking generic market promotion.

Harmonization and simplification of food laws by an appropriate enactment to cover all provisions relating to food products so that the existing system of multiple laws is replaced and also covering issues concerning standards Nutrition, Merit goods, futures marketing, equalisation fund etc.

Efforts to expand the availability of the right kind and quality of raw material round the year by increasing production, improving productivity.

Strengthening of database and market intelligence system through studies and surveys to be conducted in various States to enable planned investment in the appropriate sector matching with the availability of raw material and marketability of processed products.

Strengthening extension services and to the farmers and co-operatives in the areas of post harvest management of agro-produce to encourage creation of pre-processing facilities near the farms like washing, fumigation, packaging etc.

Efforts to encourage setting up of agro-processing facilities as close to the area of production as possible to avoid wastage and reduce transportation cost.

Promotion of investments, both foreign and domestic.

Simplification of documentation and procedures under taxation laws to avoid unnecessary harassment arising out of mere technicalities.

Infrastructural Development The Policy will facilitate:

y

Establishment of cold chain, low cost pre-cooling facilities near farms, cold stores and grading, sorting, packing facilities to reduce wastage, improve quality and shelf life of products.

Application of biotechnology, remote sensing technology, energy saving technologies and technologies for environmental protection.

Building up a strong infrastructural base for production of value added products with special emphasis on food safety and quality matching international standards.

Development of Packaging Technologies for individual products, especially cut-fruits & vegetables, so as to increase their shelf life and improve consumer acceptance both in the domestic and international markets.

Development of new technologies in Food Processing & Packaging and also to provide for the mechanism to facilitate quick transfer of technologies to field through a net work of R&D Institutions having a Central Institute at the national level with satellite institutions located strategically in various regions to cover up the whole Country and to make available the required testing facilities. This could be done by establishing a new institution or strengthening an existing one.

Development of area-specific Agro Food Parks dedicated to processing of the predominant produce of the area e.g., apple in J&K, pineapple in North East, Lichi in Bihar, Mango in Maharashtra and Andhra Pradesh etc. etc.

Development of Anchor Industrial Centre and/or linkage with Anchor Industrial Units having network of small processing units.

Development of Agro-industrial multi-products units capable of processing a cluster of trans-seasonal produces.

Backward Linkage The Policy will promote:

y

Establishment of a sustained and lasting linkage between the farmers and the processors based on mutual trust, understanding and benefits by utilizing the existing infrastructure of cooperative, village panchayats and such other institutions.

Mechanism to reduce the gap between the farm gate price of agro-produce and the final price paid by the consumer.

Development of Futures Market in the best interest of both the farmers and the processors ensuring a minimum price stability to the farmer and a sustained supply of raw material to the processor.

Setting up of an Equalization Fund to ensure sustained supply of raw material at a particular price level and at the same time to plough back the savings occurring in the eventuality of lower price to make the Fund self-regenerative.

Forward Linkage The policy will promote:

y

Establishment of a strong linkage between the processor and the market to effect cost economies by elimination of avoidable intermediaries.

Establishment of marketing network with an apex body to ensure proper marketing of processed products.

Development of marketing capabilities both with regard to infrastructure and quality in order to promote competitive capabilities to face not only the WTO challenge but to undertake exports in a big way.

Given the trends in the Indian food and beverage sector including key industry consideration, it is imperative for the Indian industry to leverage the emerging opportunities at once. These could be:
y y

Exploitation of the huge untapped potential in processed foods. Opportunities presented by contract farming, captive supplies of raw materials, disintermediation and direct access to farmers, availability of new and improved seeds and farm technology.

Value addition to unprocessed categories of food such as dairy, fruits and vegetable, staples and edible oils.

Exploitation of increasing health and safety awareness of the Indian consumer - this would pave the way for value added products on a health platform.

Investment in supply chain in order to improve costs, tighten supplies and minimize wastage.

Investment in better packaging and cold chain infrastructure will aid the processed food and beverage sector as these would aid in processing of fruits and vegetables.

Exploration of appropriate regional branding strategies in order to appeal to the deep rooted traditions, values and customs of the consumer

Taking advantage of the inherent ethnic tastes and food habits of the Indian consumer -this provides the local food players a distinct advantage over foreign entrants into the sector and poses an entry barrier for the latter

Exploitation of the increasing consumerism fuelled by new job opportunities, larger disposable incomes and the emerging boom in modern retail trade.

Opportunities for growth through the inorganic route, both domestically and outbound this would provide access to new product categories, brands, markets and new technologies.

The SEZ /AEZ opportunity would also provide players the added incentive to develop greenfield projects within these zones and enjoy additional fiscal benefits

The Indian Foods & Beverage industry is poised for a significant leap forward -- these are interesting times and continued success will depend on a proper understanding of the landscape and challenges therein, quickly exploiting emerging opportunities, skillful execution of strategic mergers and acquisitions and effecting a seamless organisation to evolve into truly global players. Thrust Areas The vision 2015 of the Government of India for the food-processing sector aims at:
y y

Enhancing and stabilizing the income level of the farmers Providing choice to consumers in terms of wide variety and taste including traditional ethnic food Providing greater assurance in terms of safety and quality of food to consumers Promoting a dynamic food processing industry Enhancing the competitiveness of food processing industry in both domestic as well as international markets Making the food processing sector attractive for both domestic and foreign investors Achieving integration of the food processing infrastructure from farm to market Having a transparent and industry friendly regulatory regime Putting in place a transparent system of standards based on science

y y y

y y y

The following specific targets would be to increase:

y

The level of processing of perishables from 6% to 20%

y y

Value addition from 20% to 35% Share in global food trade from 1.5% to 3%, by the year 2015

An estimated investment of Rs. 100,000 crores is required to achieve the discussed vision, of which Rs.45,000 crores is expected to come from the private sector, Rs. 45,000 crores from Financial Institutions and Rs. 10,000 crore from Government.

Present Status and Future Prospects of Indian Food Processing Industries

The food processing sector is highly fragmented industry, it widely comprises of the following sub-segments: fruits and vegetables, milk and milk products, beer and alcoholic beverages, meat and poultry, marine products, grain processing, packaged or convenience food and packaged drinks. A huge number of entrepreneurs in this industry are small in terms of their production and operations, and are largely concentrated in the unorganized segment. This segment accounts for more than 70% of the output in terms of volume and 50% in terms of value. Though the organized sector seems comparatively small, it is growing at a much faster pace.

Source: D&B Research Structure of the Indian Food Processing Industry

Food Processing Units in Organized Sector (numbers)

Source: Ministry of Food Processing Industries, Annual Report 2003-04 Industry Sub-Segments Fruits & Vegetables The installed capacity of fruits and vegetables processing industry has doubled from 1.1 mn tonnes in January 1993 to 2.1 mn tonnes in 2006. Presently, the processing of fruits and vegetables is estimated to be around 2.2% of the total production in the country. The major processed items in this segment are fruit pulps and juices, fruit based ready-to-serve beverages, canned fruits and vegetables, jams, squashes, pickles, chutneys and dehydrated

vegetables. The new arrivals in this segment are vegetable curries in retortable pouches, canned mushroom and mushroom products, dried fruits and vegetables and fruit juice concentrates. The fruits and vegetable processing industry is rather fragmented. A large number of units are in household and small-scale sector, having low capacities of up to 250 tonnes per annum. From the year 2000 onwards the industry has seen a significant growth in ready-toserve beverages, pulps and fruit juices, dehydrated and frozen fruits and vegetable products, pickles, processed mushrooms and curried vegetables, and units engaged in these segments are export oriented. Exports of Processed Fruits & Vegetables (Quantity in MT, Value in Rs Mn)

Source: Ministry of Food Processing Industries, Annual Report 2005-06 Milk and Milk Products India is with highest livestock populations in the world, it accounts 50% of the buffaloes and 20% of the worlds cattle population, most of which are milch cows and milch buffaloes. Indias dairy industry is considered as one of the most successful development industry in the post-Independence era. In 2005-06 total milk productions in the country was over 90 million tonnes with a per capita availability of 229 gms per day. During 1993-2005, the dairy industry recorded an annual growth of 4%, which is almost 3 times the average growth rate of the dairy industry in the world. The total milk processing in India is around 35%, of which the organized dairy industry accounts for 13% while remaining is either consumed at farm level, or sold as fresh, non-pasteurized milk through unorganized channels. In an organized dairy industry, dairy cooperatives account for the major share of processed liquid milk marketed in India. Milk is processed and marketed by 170 Milk Producers

Cooperative Unions, which federate into 15 State Cooperative Milk Marketing Federations. Over the years, several brands have been created by cooperatives like Amul (GCMMF), Vijaya (AP), Verka (Punjab), Saras (Rajasthan). Nandini (Karnataka), Milma (Kerala) and Gokul (Kolhapur). The milk surplus states in India are Uttar Pradesh, Punjab, Haryana, Rajasthan, Gujarat, Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu. The manufacturing of milk products is very much concentrated in these states due to the availability of milk in huge quantity. According to the Ministry of Food Processing Industries, exports of dairy products have been growing at the rate of 25% per annum in terms of quantity and 28% in terms of value since 2001. Significant investment opportunities exist for the manufacturing of value-added milk products like milk powder, packaged milk, butter, ghee, cheese and ready-to-drink milk products. Meat & Poultry Since 1995, production of meat and its products has been significantly growing at a rate of 4% per annum. Presently the processing level of buffalo meat is estimated at 21%, poultry is estimated at 6% while marine products are estimated at 8%. But only about 1% of the total meat is converted into value added products like sausages, ham, bacon, kababs, meatballs, etc. Processing of meat is licensed under the Meat Food Products Order, 1973. Presently the country has 3,600 slaughterhouses, 9 modern abattoirs and 171 meatprocessing units licensed under the meat products order. Poultry industry is also among the faster growing sectors rising at a rate of 8% per year. It is observed that the vertical integration of poultry production and marketing has lowered costs of production, consumer prices of poultry meat and marketing margins. There are eight integrated poultry processing units in the country, which of course hold a significant share in the industry. Exports of Meat and Meat Products (Quantity in MT, Value in Rs Mn)

Source: Ministry of Food Processing Industries, Annual Report 2005-06 Meat export is largely driven by poultry, buffalo, sheep and goat meat, which is growing at close to 30% per annum in terms of quantity. It is considered that the growing number of fast food outlets in the country has and will have a notable impact on the meat processing industry. Marine Products India is the largest fish producing country in the world it is the third largest fish producer in the world while ranks second in inland fish production. Categorically Indias potential for fishes, from both inland and marine resources, is supplemented by the 8,000 km coastline, 3 mn hectares of reservoirs, 50,600 sq km of continental shelf area, 1.4 mn hectares of brackish water and 2.2 mn sq km of exclusive economic zone. Processing of marine produce into canned and frozen forms is carried out fully for the export market. With regards to infrastructure facilities for processing of marine products there are 372 freezing units with a daily processing capacity of 10,320 tonnes and 504 frozen storage facilities for safe storage with a capacity of 138,229.10 tonnes, besides there are 11 surimi units, 473 pre-processing centres and 236 other storages. Processed fish products for export include conventional block frozen products, individual quick frozen products (IQF), minced fish products like fish sausage, cakes, cutlets, pastes, surimi, texturised products and dry fish etc. Exports of marine products have been inconsistent and on a declining trend which can be owed to the adverse market conditions prevailing in the European and American markets.

The anti-dumping procedure initiated by the US Government has affected Indias shrimp exports to the US. Fish Production & Exports

Source: Ministry of Food Processing Industries, Annual Report 2005-06 Grain Processing Processing of grain includes milling of wheat, rice and pulses. In 1999-00, there were more than 91,000 rice hullers and 2,60,000 small flourmills which were engaged in primary milling. There are 43,000 modernized rice mills and huller-cum-shellers. Around 820 large flourmills in the country convert about 10.5 mn tonnes of wheat into wheat products. Also there are 10,000 pulse mills milling about 75% of pulse production of 14 mn tonnes in the country. Primary milling of grains is the considered to be the important activity in the grainprocessing segment of the industry. However, primary milling adds little to shelf life, wastage control and value addition. Around 65% of rice production is milled in modern rice mills. However, the sheller-cum-huller mills operating give low recovery. Wheat is processed for flour, refined wheat flour, semolina and grits. Apart from the 820 large flourmills, there are over 3 lakh small units operating in this segment in the unorganised sector. Dal milling is the third largest in the grain processing industry, and have about 11,000 mechanised mills in the organised segment. Oilseed processing is another major segment, an activity largely concentrated in the cottage industry. According to estimates, there are approximately 2.5 lakh ghanis and kolus which are animal operated oil expellers, 50,000 mechanical oil expellers, 15,500 oil mills, 725 solvent extraction plants, 300 oil refineries and over 175 hydrogenated vegetable oil plants. Indian Basmati rice has gained international recognition, and is a premium export product. Branded grains as well as grain processing is now gaining popularity due to hygienic packaging. Beer & Alcoholic Beverages When discussed on alcoholic beverages, India is considered to be the third largest market for alcoholic beverages in the world. The domestic beer and alcoholic beverage market is largely dominated by United Breweries, Mohan Meakins and Radico Khaitan. The demand for

beer and spirits is estimated to be around 373 million cases per year. There are 12 joint venture companies having a licensed capacity of 33,919 kilo-litres per annum for production of grain based alcoholic beverages. Around 56 units are manufacturing beer under license from the Government of India. Country liquor and Indian Made Foreign Liquor are the two segments in liquor; both cater to different sections of society . The former is very much consumed in rural areas and by lowincome groups, while the middle and high-income groups consume the latter. Liquor license outlets in India figures approximately 23,000 with another 10,000 outlets in the form of bars and restaurants. Regulations in this sector differ state-wise in terms of excise and custom duty. In Tamil Nadu, Kerala and Andhra Pradesh, the distribution is controlled by the state government, and any change XVIII in the ruling party has a direct impact on the availability of alcohol. The wine industry in India has come into prominence lately and has been receiving support from the Government as well, to promote the industry,. The market for this industry has been estimated to be growing at around 25% annually. Maharashtra has emerged as an important state for the manufacture of wines. Consumer Foods This segment comprises of packaged foods, aerated soft drinks, packaged drinking water and alcoholic beverages. Packaged / Convenience Foods Consumer food industry mainly consists of ready-to-eat and ready-to-cook products, salted snacks, chips, pasta products, cocoa based products, bakery products, biscuits, soft drinks, etc. There are around 60,000 bakeries, several pasta food units and 20,000 traditional food units and in India. The bakery industry is among the few processed food segments whose production has been increasing consistently in the country in the last few years. Products of bakery include bread, biscuits, pastries, cakes, buns, rusk etc. This activity is mostly concentrated in the unorganized sector. Bread and biscuits constitute the largest segment of consumer foods with an annual production of around 4.00 million tonnes. Bread manufacturing is reserved for the small-scale sector. Out of the total production of bread, 40% is produced in the organized sector and remaining 60% in the unorganised sector, in the production of biscuits the share of unorganized sector is about 80%. Cocoa Products Cocoa products like chocolates, drinking chocolate, cocoa butter substitutes, cocoa based malted milk foods are highly in demand these days, 20 production units are engaged in their manufacture with an annual production of about 34,000 tonnes. Soft drinks After packed tea and packed biscuits the soft drink segment is considered to be the 3rd largest in the packaged foods industry. Over 100 plants are engaged in aerated soft drinks

industry and provide huge employment. It has obviously attracted one of the highest FDI in the country. Strong forward and backward linkages with glass, plastic, refrigeration, sugar and the transportation industry further strengthen the position of the industry. Soft drink segment has a huge potential in the Indian market, as a vast portion of the market is still to cover. Exports of Consumer Foods (Quantity in MT, Value in Rs Mn)

Source: Ministry of Food Processing Industries, Annual Report 2005-06 Constraints & Drivers of Growth Changing lifestyles, food habits, organized food retail and urbanization are the key factors for processed foods in India, these are post-liberalization trends and they give boost to the sector. There has been a notable change in consumption pattern in India. Unlike earlier, now the share and growth rates for fruits, vegetables, meats and dairy have gone higher compared to cereals and pulses. Such a shift implies a need to diversify the food production base to match the changing consumption preferences. Also in developed countries it has been observed that there has been a shift from carbohydrate staple to animal sources and sugar. Going by this pattern, in future, there will be demand for prepared meals, snack foods and convenience foods and further on the demand would shift towards functional, organic and diet foods. Some of the key constraints identified by the food processing industry include: y y y y y y y Poor infrastructure in terms of cold storage, warehousing, etc Inadequate quality control and testing infrastructure Inefficient supply chain and involvement of middlemen High transportation and inventory carrying cost Affordability, cultural and regional preference of fresh food High taxation High packaging cost

In terms of policy support, the ministry of food processing has taken the following initiatives:

y y y y y y y y y y y

Formulation of the National Food Processing Policy Complete de-licensing, excluding for alcoholic beverages Declared as priority sector for lending in 1999 100% FDI on automatic route Excise duty waived on fruits and vegetables processing from 2000 01 Income tax holiday for fruits and vegetables processing from 2004 05 Customs duty reduced on freezer van from 20% to 10% from 2005 06 Implementation of Fruit Products Order Implementation of Meat Food Products Order Enactment of FSS Bill 2005 Food Safety and Standards Bill, 2005

Apart from these initiatives, the Centre has requested state Governments to undertake the following reforms: y y y y Amendment to the APMC Act Lowering of VAT rates Declaring the industry as seasonal Integrate the promotional structure

SWOT Analysis of FoodProcessing Industry Strengths y y y y Abundant availability of raw material Priority sector status for agro-processing given by the central Government Vast network of manufacturing facilities all over the country Vast domestic market

Weaknesses y y y y y y Low availability of adequate infrastructural facilities Lack of adequate quality control and testing methods as per international standards Inefficient supply chain due to a large number of intermediaries High requirement of working capital. Inadequately developed linkages between R&D labs and industry. Seasonality of raw material

Opportunities y y y y y Large crop and material base offering a vast potential for agro processing activities Setting of SEZ/AEZ and food parks for providing added incentive to develop greenfield projects Rising income levels and changing consumption patterns Favourable demographic profile and changing lifestyles Integration of development in contemporary technologies such as electronics, material science, bio-technology etc. offer vast scope for rapid improvement and progress Opening of global markets

Threats

y y y y

Affordability and cultural preferences of fresh food High inventory carrying cost High taxation High packaging cost

y y y y y

Vision & Mission

Vision - Provide quality food and beverages to consumers at affordable prices while ensuring fair returns to the producers. Mission - Mother Dairys heritage is intrinsically linked to the cooperative movement in India. With determination & pride we will continue to serve our farmers, rural India & our consumers. Our values reflect who we are & what we firmly believe in.

Mother Dairy, set up in 1974, is a wholly owned subsidiary of National Dairy Development Board (NDDB) of India.

Products
Mother Dairy's range of products include the brands Mother Dairy (milk, milk products, curd, ice cream, butter, etc), Dhara (range of edible oils) and Safal (range of fresh fruits and vegetables, frozen vegetables, fruit juices). Mother Dairy Fruit and Vegetable Pvt. Ltd. offers the following products: Mother Dairy markets dairy products like Liquid Milk, Ice Creams, Flavoured Milk, Dahi, Lassi, Mishti Doi, Ghee, White Butter, Table Butter, Cheese, UHT Milk, Dhara range of edible oils and the Safal range of fresh Fruits & Vegetables, Frozen Vegetables and Fruit Juices at a national level, through its sales and distribution networks, for marketing food items. Mother Dairy milk (Bulk Vended Milk) is fortified with vitamin A @2000 IU per litre of milk as a part of social accountability. This program was started with the Mother Dairy, Delhi, since February 1980and there after Mother Dairy is continuing this program on their own as a social responsibility without having any financial assistance from the Government as well as since it is felt that BVM is generally consumed by the middle / lower middle / poor strata of the society. It is also found that the dietary practices adopted by these classes are deficient in Vitamin A. Mother Dairy sources significant part of its requirement of liquid milk from dairy cooperatives. Mother Dairy sources fruits and vegetables from farmers / growers associations. Mother Dairy also contributes to the cause of oilseeds grower cooperatives that manufacture/ pack the Dhara range of edible oils by undertaking to nationally market all Dhara products. At Mother Dairy, processing of milk is controlled by process automation whereby state-of-theart microprocessor technology is adopted to integrate and completely automate all functions of the milk processing areas to ensure high product quality/ reliability and safety. Mother Dairy is an IS/ ISO-9002, IS-15000 HACCP and IS-14001 EMS certified organization. Moreover, its Quality Assurance Laboratory is certified by National Accreditation Board for Testing and Calibration Laboratory (NABL)-Department of Science and Technology, Government of India. Mother Dairy markets approximately 2.8 million liters of milk daily in the markets of Delhi, Mumbai, Saurashtra and Hyderabad. Mother Dairy Milk has a market share of 66% in the branded sector in Delhi where it sells 2.3 million liters of milk daily and undertakes its marketing operations through around 14,000 retail outlets and 845 exclusive outlets of Mother Dairy. The companys derives significant competitive advantage from its unique distribution network of bulk vending booths, retail outlets and mobile units. Mother Dairy ice creams launched in the year 1995 have shown continuous growth over the years and today boasts of approximately 62% market share in Delhi and NCR. Mother Dairy also manufactures and markets a wide range of dairy products that include Butter, Dahi, Ghee, Cheese, UHT Milk, Lassi & Flavored Milk and most of these products are available across the country.

The company markets an array of fresh and frozen fruit and vegetable products under the brand name SAFAL through a chain of 400+ own Fruit and Vegetable shops and more than 20,000 retail outlets in various parts of the country. Fresh produce from the producers is handled at the Companys modern distribution facility in Delhi with an annual capacity of 200,000 MT. An IQF facility with capacity of around 75 MT per day is also operational in Delhi. A state-of-the-art fruit processing plant of fruit handling capacity of 120 MT per day, a 100 percent EOU, setup in 1996 at Mumbai supplies quality products in the international market. With increasing demand another state-of-the-art fruit processing plant has been set up at Bangalore with fruit handling capacity of around 250 MT per day.

Quality Standards
Mother Dairy is an IS/ ISO 9002, IS 15000 HACCP and IS 14001 EMS certified organization. Mother Dairy, Delhi has been awarded ISO 9001:2000 (Quality Management Systems), HACCP, 2002 RvA (Food Safety Management Systems) and ISO 14001:2004 (Environmental Management Systems) Certifications. Moreover, National Accreditation Board accredits its Quality Assurance Laboratory as per ISO/IEC 17025:1999 for Testing and Calibration Laboratories, Department of Science and Technology, Government of India. Categories: Food companies of India | Cooperatives in India | Dairy products companies of India | Companies based in New Delhi | 1974 establishments The content on this page originates from Wikipedia and is licensed under the GNU Free Document License or the Creative Commons CC-BY-SA license. Expand Your Search Dabur Amul Related Q&A How many days will a dairy calf stay with it's mother cow In commercial dairy operations, it's usually 1 day. On farms where dairy cows are kept as either nurse cows or as a hobby-farm milk cow, a calf will stay with its momma for at least 4 to 6 months, sha... What are the hours of the Dairy God Mother in Alexandria Virginia Dairy Godmother 2310 Mount Vernon Avenue, Alexandria, VA 22301 (703) 683-7767 Mon 129pm, Closed Tue, Wed 12-9pm, Thur-Sat 12-10pm, Sun 12-9pm How is Mother Dairy doing under Sanjay Sinha mother dairy is increasing prices almost in every 2 months....donno abt sanjay sinha More Related Questions Related Images

Fresh strategy Safal, India s oldest food and vegetable supply chain, is revamping outlets and expanding its presence to stave off competition from private players large-format stores Anurag Prasad

It started off as a central government initiative to help farmers get better remuneration for their perishable produce. Adopted from Gujarats successful Amul cooperative model, the intention was to minimise exploitation by middlemen and protect them from daily price volatility. It was also aimed at helping consumers get fresh supplies of fruit and vegetables at a fair price from retail outlets in the

neighbourhood. Mother Dairy, which was already procuring milk through associations in and around Delhi, was asked to do a pilot project on similar lines for perishables. And thus was born Indias oldest food and vegetable supply chain, Safal Daily Fresh, in 1987-88. Safal soon became a unit of Mother Dairy Foods ON THE MENU: Sunil Bansal, CEO, Mother Dairy Fruit and Processing, a wholly-owned company of Mother Diary Vegetables, is planning to revamp 100 more outlets Fruit & Vegetables, which itself was created in the year 2000 as a subsidiary of the National Dairy Development Board, a pioneer in Indias dairy sector. Safals turnover has grown from Rs 2.7 crore to over Rs 300 crore at present. Almost 85% of its revenues come from the sale of fresh fruit and vegetables, while the rest is from processed foodstuff. Now, 20 years after its launch, Safal is gearing up for another challengecompetition from corporate houses that have entered the perishable commodities space with large-format stores and deep pockets. Already Mukesh Ambanis Reliance Fresh chain, the Birlas, Bharti and The Future Group, to name just a few, have muscled in, posing a big challenge to established players like Safal. Time to spruce up
What is Safal, a government-sponsored entity, doing to remain relevant in such a scenario? A casual visit to any of the 400-odd exclusive Safal retail outlets across India will put any customer off. Shabby racks and stale fruit and vegetables are the order of the day, the very opposite of what the brand boasts ofquality and freshness. Private players, on the other hand, have taken a leap forward, with bright lighting, air conditioning and professional staff to help customers with a better shopping experience. For starters, Safal wants to change customer perception of itself as a run-down place to shop for perishables.

"We realise the changing market demand, and have started moving to improve customer delight by better presentation and are trying to deliver products as fresh as possible," says Sunil Bansal, Chief Executive Officer, Mother Dairy Fruit & Vegetables. They are not empty wordsa pilot project to give Safal a new look has just been concluded at its Sarojini Nagar (New Delhi) outlet, and by the end of the year, 100 more outlets are set to be revamped. "We are expanding. From 400 outlets in Delhi and 14 in Bangalore, Jaipur is the next stop. That will be followed by other cities. This will give us a panIndia presence," Bansal says. "We are also bringing in the cash-and-carry model in select Delhi outlets to improve volumes." Safal outlets may be leased, rented or owned by Mother Dairy, but the onus of management and product sales rests with the concessionaire (usually an ex-service man), whose dead stocks are not taken back. While the handling, display and management of the produce are done by the concessionaire, the rates of fruit and vegetables and running cost of each outlet are decided by Safal. In its new strategy, newer Safal outlets need not necessarily be given only to ex-service men; and even if they are, a business ethics module is being prepared to train them in better customer handling and presentation. Safal is also expanding its portfolio of frozen, packed and cut vegetables. "People are ready to pay. Depending on demand, we would be adding bitter-gourd, pineapple, French beans etc in the cut-packaged category," says Vinod Khurana, the chief of its 22-acre central distribution facility at Mangolpuri in Delhi. This unit has an annual capacity to process 120,000 metric tonnes of fruit and vegetables received from over 12,000 growers spread across 16 states. In fact, it is this kind of forward and backward linkage to the supply chain that private players are struggling to establish.
Safals success lies in the relationships and linkages it has built with farmers over the years

"They (the private players) poached our field staff for their experience and linkages with farmers. What they failed to realise was that we work as a team, not as individuals. The system is not dependent on one particular person," says Bansal.

Core strengths
Safals two-decade-old expertise in supply-chain management is hard to match. Its entire supply chain has been online since inception. This system is now being upgraded with a new enterprise resource planning software. In the first phase, it will connect Safals various units; and in the next, it will help connect the village collection centres. Safals weekly payments are done through the farmers association bank account, from where individual farmers are issued cheques. "There is complete transparency. We know how much we will get and when, unlike in the mandi where payment schedules are not fixed and commissions to agents are as high 10-15%," says 55-year-old Nilamber Tiwari of Kheda village in Uttarakhand, who has been associated with Safal for almost 12 years now.

The rates are decided according to the demand-supply situation, but the procurement rate is usually higher than the mandi rate. "Farmer benefit is the prime motive, and everything revolves around that," says V Kathuria, an assistant manager with Safal, who also doubles up as an adviser to farmers. "It is our scale and procurement process that help us give the best prices lower than market rates for customers and higher than mandi rates for farmers," says Bansal. Safals success lies in the relationships and linkages it has established with farmers over the years. This ensures Safal is preferred over other buyers even if it is picking up less than 10% of a farmers entire produce. In fact, Safal has emerged as a partner and advisor to farmers, right from the crop-planning stage to when the produce is harvested and sold. Safals expansion plan is based on leveraging its all-India supply chain strength and its low-cost model of using rented and leased premises to sell its over 125 fruit and vegetable varieties. With 735 direct procurement sources, 12,000 associate growers and more than 100,000 footfalls at its outlets everyday, Safal looks well-poised to take on the private players.

nd now, farm processing outsourcing Outsourced contract farming, where one company tells another to help grow and procure specific farm produce, may spell big bucks for all Sudipto Dey

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It does not take much cajoling to make Surjit Singh Sekhon, Mohinderjeet Singh, Sukhjit Singh and Satinder Singh break into a bhangra jigthat too, amid their lush green paddy fields, situated just off the Jammu-Pathankot highway, around 20 kilometres from Jalandhar town. They are expecting a good harvest in mid-October, the price of Basmati rice has shot up by 30% in the last one year, and so have their income-generating prospectsunderstandably, they are in good spirits. They are part of a growing tribe of 4,000-odd farmers across Punjab and Rajasthan who sell their produce directly to buyers, at competitive market PROSPEROUS: Over 4,000 farmers in Punjab and Rajasthan rates. In this case, the pre-contracted buyer is LT are reaping the benefits of commercial contract farming Overseas, a leading rice miller, exporter and owner of the popular Daawat brand. LT Overseas will pick up the ricearound 20,000 tonnesand will process, package and ship it to the Middle East, Europe and the US. "Prompt payments and the absence of middlemen are added incentives," says Sekhon, who has around 20 acres of land under paddy cultivation. In neighbouring Rajasthan, some 1,300-odd farmers growing barley in Ganganagar and Hanumangarh districts have similar reasons for good cheer. Spirits major UB Group is offering them a 75-80% premium (over the government-mandated minimum support price) for growing barley for the brewing industry. This year, UB plans to meet 5-10% of its annual requirement for barley from 10,000 acres under cultivation in Rajasthan. "We want farmers to treat barley as a commercial crop," says RK Jindal, who heads the malt division at the group. The 30-40% jump in barley prices over the last couple of years has also come as a booster shot to these farmers.

Outsourced grain
Such stories of contract farming are, by now, quite commonplace in rural India, but there is something unique to both examples.

LT Overseas does not deal with the paddy farmers directly, nor does the UB Group with barley growers. Instead, it is soft drinks and snacks major, Pepsi Foods, that handles the entire contract farming business for the two companies. This includes roping in farmers, giving technical support and connecting them to buyers. For many years now, Pepsi has been working with potato farmers for raw material that go into its snacks sold under the Lays brand; but that has been for captive use. However, its partnership with farmers to grow paddy and barley are intended for commercial sale to specific buyers. This is a fairly new phenomenon and may be categorised under farm process outsourcing. In fact, Pepsi has been among the first ones to adopt commercial contract farming. Others, such as Bharti Del Monte and Mahindra Subhlabh Services, the agri-business arms of telecom behemoth Bharti Group and auto major Mahindra & Mahindra, respectively, are fairly new to this field. Bharti Del Monte is working with over 200 farmers in Punjab, Rajasthan, UP and Maharashtra for baby corn and sweet corn cultivation. Over the next one year, it plans to extend the area under baby corn cultivation from 600 acres currently to 1,000 acres. It will also bring to market 15,000 tonnes of baby corn and sweet corn this year; around one-third of that would be exported to overseas markets. "Over the last two years, farmer incomes have gone up by 30-40%," says Rakesh Bharti Mittal, Vice-Chairman, Bharti Enterprises, and the man who heads the groups agribusiness division. In Maharashtra, Mahindra Subhlabh Services is playing a key role in offering extension support and marketing services that help grape growers tap the European markets.

Widening footprint
Having tasted success with this method, farmers, buyers and commercial contract agencies are looking to extend their footprint. In Rajasthan, Pepsi is planning to bring another 4,000 acres under barley cultivation by next year. The UB Group has an annual requirement of more than 100,000 tonnes of barley, and wants to meet 70% of its requirements through contract farming over the next four years. However, that is Pepsis headache, not UBs. Punjab, Haryana, Karnataka and UP are the other states where efforts are on to bring more land under barley cultivation, says UBs Jindal. As for paddy, after Punjab and Rajasthan, UP is the next halt for Pepsi. It has 23,000 acres under paddy cultivation in Punjab and Rajasthan, and plans to add another 4,000 acres, with a major thrust on the direct-seeding method (Read Experimental grain). Such arrangements bring in the benefit of outsourcing into farmlands. Companies like LT Overseas and UB can focus on their respective core competencies, leaving the agricultural linkages of

ON A NEW GROUND: Direct seeding machines reduce water consumption in paddy by around 30%

their businesses to Pepsi. For Pepsi, more such outsourced deals help increase economies of scale. The economic rationale for this model is not very different from that of independent service providers in the BPO space. As modern retail formats gain momentum, specialist commercial contract farming institutions will start feeding multiple retail entities. In fact, these retail chains, hotels and quick-format restaurants are fuelling domestic demand for contracted produce. "Only when modern retail formats in the domestic market are able to generate enough volumes for fruits and vegetables will the business of non-captive contract farming become sustainable," says Abhiram Seth, who was until recently heading Pepsis contract farming initiatives in the country, but quit to turn a farming entrepreneur. Seth is now involved in a project to grow a type of seaweed in coastal Tamil Nadu, which will be exported for industrial use. The project could employ up to 50,000 people, over the next five years. Seth is backing his entrepreneurial instincts, which whisper that commercial contract farming could be the next big business opportunity.

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