White Paper Food Processing1 8

8/7/2019 White Paper Food Processing1 8

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White Paper on Food & FoodProcessing Industry in India

S.No Topic

1 Executive Summary

2 Opportunities & Challenges for Food Industry in India

3 India Food & Agriculture : An overview

4 Basic structure of Food Processing Industry

5 Consumption pattern of Food in India

6 Sectors in Food Processing Industry

7 Growth Drivers for Food Processing Industry

8 Critical Success Factors

9 Emerging Business models

10 Major Investments in Food Processing Industry

11 Key Trends in Food Processing Industry

12 Leading players : Profile

13Case Study:

1. Amul2. Lijjat Pappad

2011

DEssence Consulting

[email protected]

303, Aar Pee Center, 11th Road,

MIDC, Andheri (E), Mumbai-400093


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EXECUTIVE SUMMARY

Food processing involves any type of value addition to agricultural or horticultural produce and

also includes processes such as grading, sorting, and packaging which enhance shelf life of food

products. The food processing industry provides vital linkages and synergies between industry

and agriculture.

The Food Processing Industry sector in India is one of the largest in terms of production,

consumption, export and growth prospects. The government has accorded it a high priority, with

a number of fiscal reliefs and incentives, to encourage commercialization and value addition to

agricultural produce, for minimizing pre/post harvest wastage, generating employment and

export growth.

The idea of India is gradually changing as number of countries showing interest to invest in

India is increasing. In fact it is observed that India has displaced the US as the second most

favoured destination in the world for FDI after China.

Food industry is one of the key sectors which is the mainstay of Indian economy because of its

high share in employment and major contribution to GDP. At present the food processing sector

employs about 13 million people directly and about 35 million people indirectly. The food

market in India is estimated at over Rs. 9,100 billion and accounts for about two third of the total

Indian retail market.

India's food processing sector covers a wide range of products 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.


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Looking into some of the key facts, India has largest irrigated land in the world. India produces

annually 105 million tonnes of milk (highest in the world), 150 million tonnes of fruits &

vegetables (second largest), 485 million livestock (largest), 230 million tonnes food-grain (third

largest), 7 million tonnes of fish (3rd largest), 489 million Poultry and 45,200 million eggs.

Food processing industry is currently growing at around 14%. The industry received FDI

totalling Rs 9450 million in 2009-10. However, Indias share in export of processed food in

global trade is only 1.5 %; whereas the size of the global processed-food market is estimated at

Rs. 190 trillion and nearly 80 per cent of agricultural products in the developed countries get

processed and packaged.

India has set itself a target of doubling its processed food production by 2015, and will set up 10

food technology parks during the next year with a view to achieving this. According to the India

Food and Drink Report by research analysis firm Research and Markets, by 2012, Indias

processed food output is likely to grow by 44.2 per cent to touch Rs. 4,505 billion, while

packaged food sales will increase by 67.5 per cent to reach Rs. 1,085 billion. On a per capita

basis, per capita packaged food spending is expected to grow by 56.5 per cent to Rs. 903 by

2012.


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Opportunities in Food Processing in India

Diverse agro-climatic conditionslead to a wide-ranging and large raw

material base suitable for food

processing industries in India.

Currently a very small percentage

(less than 2%) of these is processed

into value added products, leaves

opportunity to explore in the sector.

One of the biggest emergingmarkets, with more than 1 billion

population and 250 million strong

middle class sets a large consumer

base within the country.

India is the seventh largest country,with extensive administrative

structure and independent judiciary,

a sound financial & infrastructural

network. Stable and flourishing

democracy is also an opportunistic

attribute of the country.

Increasing literacy, rapidurbanization and rising per capita

income resulting in rapid growth and

changes in demand patterns. This is

creating great opportunities for

exploring the large hidden markets.

An average Indian spends about 40

% of household expenditure on food

items.

Demand for processed /conveniencefood is constantly increasing.

Cheaper workforce availability canbe effectively utilized to setup large

low cost production bases for

domestic and export markets.

Liberalized policies with specificincentives for high priority food

processing sector provide very

favourable environment for

investments and exports in the

sector.


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Challenges in Food Processing Unprocessed foods are susceptible to

spoilage by biochemical processes,

microbial attack and infestation. The

right post harvest practices such as

good processing techniques, and

proper packaging, transportation and

storage (of even processed foods)

can play a significant role in

reducing spoilage and extending

shelf life.

The challenges in processing lie inretaining the nutritional value,

flavour, aroma, and texture of foods,

and presenting them in near natural

form with added conveniences.

Besides, processed foods need to be

offered to the consumer in hygienic

and attractive packaging, and at low

incremental costs.

The challenges for the foodpreservation, distribution and

processing sectors are diverse and

demanding, and need to be addressed

on several fronts to derive maximum

market benefits. Presently, the

organizations addressing the

educational and R & D requirements

are too few, and there is a pressing

need for supplementing their efforts.

In the emerging scenario, the FoodEngineering professional needs to

develop sufficient awareness and

appreciation of the relevant

principles of life sciences, and

physical sciences, as well as of a

0.25%

1%2% 2% 0.25%

2% 1%2%

1%

3% 2%

0%2%4%6%8%

10%12%14%

16%18%20%

High wastage reflects inefficiencies in the delivery chain

Wastage outside the State

Wastage within the State

Wastage within the District

From the Farmgate to Local Mandi

Source: Ministry of Food Processing Annual Report 2007-08


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wide variety of other topics

including: nutrition, preservation and

storage techniques, processing unit

operations, bio-processing, waste

management, distribution and supply

chain management, food laws and

regulations and so on.

Besides, the professional needs todevelop an appreciation of R&D and

innovation in critical technology

areas such as: newer or novel process

development in preservation and

storage techniques, rheology,

colloids and dispersal systems,

packaging-polymers and composites,

sensors for detection and process

control, bioprocess engineering etc.


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Overvie

The scenario of the food

changed drastically due to

lifestyle, food habits and ch

for healthy and high value fo

with improved technolog

liberalization policies have

growth opportunities in the f

industry

The size of the global findustry which accou

fourth of the global fo

Rs.190 trillion.

Major economies iprocessing include US,and Japan.US and Euro

more than 50% of the gl

India has been one ofproducers in the world,

largest arable land area.

wof Food Processing Indu

industry has

the changing

ange. Demand

od items along

y and trade

enerated great

ood processing

od processing

ts for three

od industry is

the food

Europe, Chinae account for

bal food sales.

the key food

ith the second

It is the largest

producer of milk,

tea in the world

producer of wh

vegetables.

The consumptionchanged due to

changing lifesty

industry can do

Information Tec

urban India.

31%

9%

Share in G

Source: DEssence Consulting Sec

stry

pulses, sugarcane and

nd the second largest

eat, rice, fruits and

pattern in India has

conomic growth and

e. Food processing

to rural India what

nology has done to

21%

39%

lobal Food Processing

Industry

USA

Europe

Asia Pacific

Rest of theWorld

ondary Research


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While India has an abundant supply of food,

the food processing industry is still nascent:

Country-wise Level of Processing

Despite these low volumes, the processedfood industry is one of the largest

industries in the country - it is ranked

fifth in terms of production, consumption,

export and expected growth.

Processed food industry accounts for 13per cent of the countrys exports and 6

per cent of total industrial investment.

The food industry size is estimated atRs.9100 billion and the food processing

industry at Rs.350 billion

According to official data, India exportedabout 17.5 million tone of agri and

processed foods worth Rs 31,870 Crore ($

6639.58mn.) in FY08 against 10.9 million

tone valued at Rs 21,805.9 Crore

($4361.2mn.) the previous year which

shows growth of more than 45% in terms

of value.

Level of Processing in Perishable product range

in India

COUNTRYLEVEL OFPROCESSING (%)

USA 80.0

France 70.0

Thailand 30.0

Malaysia 80.0

Australia 25.0

Netherland 12.0

India 1.3

Source: Rabobank

Product Organised Un-organised Total

Fruits&Vegetables

1.3 0.8 2.1

Milk & MilkProducts

13.0 22.0 35.0

Meat 21.0 - 21.0

Poultry 6.0 - 6.0

Marine 8.0 15.0 23.0

Market and Research Report 2008 (All figures in %)


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Strengths

India has access to several natural resources that provides it a competitive advantage in the food

processing sector. Due to its diverse agro-climatic conditions, it has a wide-ranging and large

raw material base suitable for food processing industries.

IINDIAS FAVOURABLE FACTOR CONDITION

Particulars India Global RankShare in Global

Production (%)

Arable Land(million hectares) 184.00 2 -

Irrigated Land (million

hectares)59.00 1 -

Coast Line (km) 8041.00 19 -

Fruits (MT) 50.00 2 10

Vegetables(MT) 100.00 2 10

Rice/Paddy(MT) 132.00 2 22

Wheat (MT) 78.40 2 12

Milk (MT) 105.00 1 16

Sugarcane(MT) 289.23 2 21

Pulses(MT) 15.11 1 21

Tea (MT) 0.95 1 28

Edible Oil seeds (MT) 28.82 3 7

Cattle (million) 226.00 1 16

Source : Ministry of Food Processing of India, 2009-10


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Basic Structure of Food Processing Industry

The chart above describes the process i.e. the Entire Value Chain for a Private Entrepreneur

from Demand Estimation to Consumption. Government i.e. Central as well as State government

along with its agencies supports the farmer and processing units to encourage this sector.


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The Stages involved in the value chain are:

1.

Market: In this stage, theEntrepreneur estimates the demand

for crops and decides which crop to

sow

2. Input: After deciding on specificcrops, the entrepreneur ploughs the

crop with the use of fertilizers,

pesticides, nutrients and water torealize a good crop.

3. Pre Harvest: After a good crop hasdeveloped, Pre Harvest involves

maintaining the crop till harvest with

the use of Latest technology and

Fertilizers.

4. Harvesting: It involves the processof separating a full grown crop for

processing, packaging, transportation

and finally for consumption.

5. Post Harvesting: After Harvesting,the crop goes through a chain of

processes to filter the crop on the

basis of Quality and many other

parameters. The crops thus chosenare packaged accordingly for safe

transportation to the market. In case

of perishable products it also

requires to be processed for their

preservation. Processing even helps

in avoiding food wastage.

6.

Transportation: It involves thephysical movement of the crop and

processed food from the farm to the

actual Market.

7. Marketing: Marketing involvesproviding sales platform for the food

products. Sometimes it is done by

the producer himself. Governmentcreates a market through setting up

APMC Depots, online websites and

also through trade exhibitions.

8. Market: Finally, the Chain getscompleted when the crop reaches the

market for consumption and the

farmers as well as the processing

units get the money out of it.


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Consumption Pattern of Household Income in India

Food is the major portion of household

consumption expenditure across all cities

categorised (Refer graph below).

Transportation is the second highest

component in expenditure. This opens up

tempting opportunities in the field of food

processing. And we can see it is in the

nascent stages of development.

34.6 31.5 34.4

20.3 21.3 20.1

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13.1

77.6

8.85.9

7.4

5.34.6 5.25.5

14.3 1610

2.9 3.1 2.9

Megacities Boomtowns Nichecities

%

oftotalpopulation

Household consumption expenditure as a share ofincome

Communication

Household &personalproducts

Education andrecreation

Apparel

Healthcare

Housing &Utilities

Transportation

Food,beverages &tobacco

Source: NCAER / FCR


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If we try to analyse the distribution of

households by major source of income, it

varies significantly across poor and non-

poor households (Refer graph below).

Labourers constitute the largest segment of

poor households and comprise over 62

percent of such households. But then,

we cannot ignore the fact that

agriculture also provides earning

source to 30.3 percent APL (Above

Poverty Line) and 22.7 percent BPL

(Below Poverty Line) households.

Overall it is found that food expenses

comprise 51.1 percent of all routine

expenditure at the all India level.21.7

3.8

18.9

8.9

25.7

62.4

30.322.7

3.4 1.6

APL households (%)BPL households (%)

Distribution of households by major

source of income

Others

Self employed inAgriculture

Labour

Self employed inNon-agriculture

Regularsalary/wages

4%

12%

7%

7%

4%

35%

5%

4%

4%

18%

Household consumer spends in India

(Total - Rs 20,721 billion)

Furniture,furnishing appliances & services

Gross rent,fuel &power

Medical care and health

Miscellaneous goods & services

Recreation,education & cultural services

Food

Clothing & footwear

Beverages,pan & intoxicants

Grocery

Transportation & communication

Source: The Max-NCAER India Financial Protection Survey

Source:Private Final Consumption Expenditure CSO;EY Research


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Sectors in Food Processing Industry

Food processing is a large sector that covers activities such as agriculture, horticulture,

plantation, animal husbandry and fisheries. It also includes other industries that use agriculture

inputs for manufacturing of edible products.

Important sub sectors in food processing industry are:-

Fruit & Vegetable Processing Fish Processing

Milk Processing Grain Processing Meat & Poultry Processing Packaged/Convenience Foods Alcoholic beverages & Soft drinks Staple foods

SEGMENT SIZE OUTPUT/ VALUE

EXTENT OF

PROCESSING(%)

SHARE OF

ORGANIZEDSECTOR (%)

KEY SEGMENTS

GROWTH

RATE (%)

Fruits &

VegetablesRs 1687.5 Cr. 02 48

Raw fruits & vegetables,pulp, canned fruits andpickles

20

Fish2.33 million

tonnes12 -

Marine fisheries, frozenproducts, minced fishproducts

20

Milk Rs 58.5 Cr. 37 15 Butter, Ghee, Cheese etc. 15

Meat & Poultry6.4 million

tonnes01 05 Cattle, Buffalo & poultry 10

Packaged Rs 9000 Cr. - 80 Noodles, vermicelli & pasta 08

Beverages Rs 697.5 Cr. - 77 Fruit based & carbonateddrinks

27

Staple Food - 50 Salt, sugar, Flour, Bread 85

Source: Investment commission of India,2009 andwww.ibef.org


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Milk Processing:

Indian stands first in the world in termsof milk production.

The current size of the Indian dairysector is Rs.3133.5 billion and has been

growing at 5 per cent a year.

The dairy sectorranks first in terms

of processed foodswith 37 per cent of

the produce being

processed.

The organisedsector processes an

estimated 20 percent of the total milk

output in India.

There are 676 dairy plants registeredwith Government of India, which come

under the organised sector.

The cooperative sector dominates themilk industry with over 70,000 village

level dairy federations at the state level.

Gujarat Cooperative Milk MarketingFederation (GCMMF or AMUL) is the

most successful player in the evolution

of the Indian Dairy Industry.

Milk and milk products contribute to asignificant 17 per cent of the countrys

total expenditure on food.

The market for dairy products isexpected to grow at 15-20 per cent.

Some private players includes Hatsun,

Heritage, Modern ,Paras, Dynamix, Parag

and Metro ,also FMCG players like

Nestle,Danone

& Britannia all

of which sell

liquid milk and

manufactures

value added

products like

milk powder,

ghee, butter, cheese, curd and butter milk in

small quantities.

Taking Dairies to the Next stage:-Indian dairies are ready to use various latest

innovative technologies that improves the

milking efficiency as well as cow

throughput including auto ID, innovative

milking claw design, electronic milk meters,

stimapulse, an auto shedding system, an

auto cleaning-in-place system (to maintain

hygiene).

.

507.15 510.75

947.25 980.86

402.68

2005-06 2006-07 2007-08 2008-09 2009-10

Exports of Dairy Products(in Cr. Rs.)

Source: APEDA


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Fish Processing:

India has large marine product andprocessing potential with varied fish

resources along the 8,041 km coastline,

28,000 km of rivers and millions of

hectares of reservoirs and brackish

water.

India is the third largest fish producer inthe world and second in in-land fish

production.

The Fisheries sector in India has beenclassified into marine, inland and

aquaculture.

The fisheries sector contributes nearly 1per cent to the countrys GDP. This

segment also provides employment to 11

million people engaged fully, partially or

in subsidiary activities pertaining to the

sector.

Indias fish production stood at a level of6.4 million tonnes. Of this, about 60 per

cent (3.9 million tons) came from marine

resources.

Fish processing is mostly targeted forexport markets.

There are over 369 freezing units with adaily processing capacity of 10,266

tonnes and 499 frozen storage units with

a capacity of 134,767 tonnes.

Processed fish product exports includeconventional block frozen products,

individual quick frozen products and

minced fish products like fish sausage,

cakes, cutlets, pastes etc.

7398.95 8338.188545.90 8588.83 9597.78

2005-06 2006-07 2007-08 2008-09 2009-10

Exports of Marine Products (in Cr. Rs.)

Source: MPEDA

PE funds in the Dairy Sector:-

It is estimated that by 2015 over Rs 10,000 crore of capital expenditure will be required to meet thegrowing demand of our burgeoning population.

Besides debt, private equity has become a preferred source of raising funds in dairy sector.

PE funds are supported by liberal FDI policies. PE funds include investment from International

Finance Corporation in Modern Dairy (North India), Actis in Nilgiri Dairy (South India), Motilal

Oswal Private Equity in Parag Milk Foods.


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Indian broiler industry has seen a rapidgrowth in the last few years - CAGR of

more than 10 per cent a year since 1998.

Beverages: The beverages market

primarily consists of non-alcoholic and

alcoholic beverages

Non alcoholic beverages

Non-alcoholic beverages can be broadlyclassified into carbonated drinks, non-

carbonated drinks and hot beverages.

The market for carbonated drinks inIndia is worth Rs.75 billion while the

juice and juice-based drinks market

accounts for Rs.12.5 billion.

Growing at a rate of 25 per cent, thefruit-drinks category is one of the fastest

growing in the beverages market.

Sports and energy drinks, whichcurrently have a low penetration in the

Indian market, have sufficient potential

to grow. They are considered a socially-

acceptable alternative to alcoholic

beverages. Hot beverages include health

drinks such as white beverages and

brown beverages such as tea/coffee as

well as branded drinks.

The total size of this market is estimatedat Rs.16,650 million by value and 85,000

tonnes by volume.

White beverages account for 65 per centof the market and brown beverages

constitute the remaining 35 per cent.

India is the largest producer of tea in theworld accounting for 28 per cent of the

total global production, at 857 million

kgs. Tea production in India has been

growing at 1.2 per cent per annum and

India is the fourth largest exporter of tea

in the world with estimated exports of

Rs. 18886.8 million in 2007-08.

India is also the fifth largest producer ofcoffee accounting for 4 per cent of the

total production in the world.

Nearly 75 per cent of Indias productionis exported and coffee exports stood at

Rs. 29,315 million in 2007-08.

Alcoholic beverages

The market for alcoholic beverages hasbeen growing consistently.

The market for wine in India wasgrowing at over 25 per cent per year.

59.84 per cent growth of wineproduction was observed in 2007-08


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(211 million litres in FY 2007-08 from

132 million litres in FY 2006-07).

Global wine majors have already set upshop in India to tap the vast potential.

Out of the total consumption of grapewine in India, around 80 per cent wine

consumption is from the major cities.

Packages/Convenient Foods:

Packaged foods segment in Indiaregistered a growth of 10 per cent in

2007.

Noodles/Vermicelli is the fastestgrowing category in this segment with a

CAGR at 15 percent.

The market for branded noodles isestimated at 230 million servings per

year.

The Soups market is still small and

nascent in India and is approximately

US$ 14 million in value.

The market for culinary products isestimated at Rs. 25 million and estimated

to grow at 18 to 20 per cent per annum.

Products like Tomato Ketchup and Jamscurrently have low penetration levels,

but are growing rapidly.

Ketchups, for example, have apenetration of just 3 per cent in India;

however this category is estimated to be

growing at 20 per cent per annum.

Staples Bread, Wheat Flour,

Salt and Sugar

Bread is slowly coming to be a stapleproduct consumed by people of all

economic classes in India.

Total bread production in the country in2004-05 was estimated at 2.7 million

tons, growing at 7.5per cent.

About 55 per cent of bread productioncomes from the organised sector.

India is the second largest producer ofwheat in the world with an output of

more than 70 million tonnes.

Branded atta (wheat flour) is animportant item in this segment with an

estimated market of US$195 million.

147.6 107.1362.7

554.85 619.65

2005-06 2006-07 2007-08 2008-09 2009-10

Export of Alocoholic Beverage(in Cr. Rupees)

Source: APEDA


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Critical Success Factor

The growth potential of Indian Food Processing Industry cannot be neglected. But require certain

competencies and success factors to exploit its potential. These include addressing current gaps

in the value chain and also leveraging on the advantages the country provides. Investors in the

sector need to be aware of these factors and build the required capabilities in their business to

ensure success. Some of the success factors are as follows:

Integrated supply chain and scale

of operation

Even though India ranks second inproduction of fruits and vegetables,

nearly 20 to 25 per cent of this

production is lost in spoilage in various

stages of harvesting.

The major problems are poor quality ofseed, planting material and lack of

technology.

Quality produce lead to investment intechnology and ability to sustain a long

gestation period for harvest.

It also results in better quality ofprocessed food. So we need to establish

backward integration like contract

farming to improve quality of produce.

Nearly 90 percent of the food processingunits are small in scale so not able to

exploit the advantage of economies of

scale.

The country has only 3600slaughterhouses, 9 modern abattoirs and

171 meat processing units, and a limited

number of pork-processing units.

This is one of the reasons penetration ofprocessed meat is extremely poor at 1

per cent in India.

These figures indicate both the need forscale, and the potential or growth offered

by the sector.

Processing Technology

Currently most of the processing in Indiais manual.

There is limited use of technology likepre-cooling facilities for vegetables,

controlled atmospheric storage andirradiation facilities. This technology is

important for extended storage of fruits

and vegetables in making them

beneficial for further processing.

In case of meat processing, even with thepresence of over 3600 licensed


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slaughter-houses in India, the level of

technology used in most of them is

limited, resulting in low exploitation of

animal population.

Bringing in modern technology is anarea that existing as well as new

investors in the sectorcan focus on, this

will make a clear difference in both

process efficiencies as well as quality of

the end product.

Increasing penetration in

Domestic market

Most of the processing units are export

oriented and hence their penetration levels in

the domestic market are low. For example,

Penetration of processed fruits andvegetables overall is 10 percent.

The relative share of branded milkproducts especially ghee is still 2 percent

Penetration of culinary products is still13.33 per cent and is largely tilted

towards metros

Consumption of packaged biscuits forIndian consumers is still low at 0.48

percent while that for Americans is 4

percent

However, there is increasing acceptanceof these products amongst the urban

population.

India has a large untapped customer baseand even a small footprint in the

domestic market would enable the player

to gain significant volumes.

Acceptance in the domestic market andhence higher penetration is driven by the

following factors:

Competitive Pricing

Consumers of processed foods are extremely

price sensitive even a small change in

pricing can have significant impact on

consumption. Competitive pricing also

enables penetration in the rural markets.

Brand competitiveness

Share of branded products in purchasesof Indian consumers has increased by 25

per cent to 35 per cent. This is especially

true for urban consumers.

Branded products like Basmati rice andGodrejs chicken have been very

successful implying that there is a good

demand for hygienic branded products at

reasonable prices.


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Product Innovation

Certain processed food categories such as

snack foods are impulse purchase products

where consumers look for novelty and new

flavours and hence these categories lack

brand loyalties. Visibility through attractive

packaging boosts consumption.

Increasing time constraints amongst the

working middle class has boosted

consumption of products like instant soups,

noodles and ready-to-make products.

Innovation in packaging and product usage

is an important success factor for processed

foods.


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Backward Integration Emerging Business Models

Everybody is well versed with the traditional methods of value chain in food processing.

Looking at the dominance of the sector towards the growth of economy it has been considered

priority sector amongst all. We can see the generic value chain of the food processing industry

below.

In recent days trend has been towards integration and collaboration across players in the value

chain, to garner mutual benefits. Such integration is initiated by manufacturers, who are looking

to integrate backward to establish linkages with farmers and logistics provider. This led to two

new models emerging in the sector Contract farming and Terminal markets.

Contract Farming

Contract Farming is an agreement between the food processor (contractor) , who is typically

a large organized player, and the farmer, whereby the farmer is contracted to plant the

contractor s crop on his land. He also agrees to harvest and deliver to the contractor a quantum

of produce, based upon anticipated yield and contracted acreage at a pre-agreed price.

The food processor provides inputs in terms of technology and training to the farmer, to improvethe yield and quality of the produce.

This results in a win-win situation that generates a steady source of income for the farmer and

eliminates supply shocks and assures good quality farm inputs which are crucial for the

processor.

The Government of India has been actively encouraging contract farming endeavours. The

National Agricultural Policy envisages that private sector participation will be encouraged

FARM INPUTS

AGGREGATORS

AND LOGISTICS

FOOD

PROCESSORS ANCILLARIES FOOD RETAILING

CONTRACTFARMING

TERMINAL

MARKET


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through contract farming and land leasing arrangements to allow accelerated technology

transfer, capital inflow and assured market for crop production .

Terminal Markets

A Terminal market is a central site, often in a metropolitan area, that serves as an assembly and

trading place for agricultural commodities. Here there are different options for disposing off the

produce. It can either be sold to the end consumer, or to the processor, or packed for export, or

even stored for disposal at a future date. It thus offers different options to farmers under a single

roof.

Typically, terminal markets operate on a hub and spoke model where the markets form the hubs,

and are linked to different collection centres (spokes) that are located close to the production

centres. The typical value chain structure for a terminal market, as well as the key activities and

corresponding infrastructure requirements at each level, are depicted in the figure below:

The Government of India is looking to promote terminal markets, as a means of integrating

domestic produce with retail chains.

There are plans to set up such markets in eight cities across five states, at a cost of US$ 131

million. The cities being considered are Mumbai, Nasik, Nagpur, Chandigarh, Rai, Patna, Bhopal

and Kolkata.

TERMINAL MARKET INFRASTRUCTURE

Grading, washing & packing

lines, quality testing,

palletisation, materialhandling, parking for

transporter.

COLLECTION CENTRES

Collection and aggregation of produceAdvisory on inputs, prices etc.Settlement of payments

Banking Finance

Sales E-auction Storage

Trader/ Processor WarehouseRetailer/exporters Cold storage

Ripening Chambers

INFRASTRUCTURE

Washing, grading, sorting,

weighment , transport,

lastic crates


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Global Farming

The next step towards globalization comes

from global farm lands. Food shortage and

reducing level of arable land is encouraging

countries to approach other territory for farm

land.

China government wants its agricultural

firms to buy or lease farm lands in Africa or

South America to bolster food security in

their country. China has 40% of farmers

across the globe but only 9% of agricultural

land. More than 40% of arable land of Brazil

is unused and china would like to take up

this land for soyabean production.

Similarly Libya is negotiating with Ukraine

for growing wheat and Saudi Arabia is too

looking for green pastures for their steadysupply of food & live stock supplies.

Food Parks

Food Parks are comprehensive industrial

estates for food-processing units where the

industries would have the provision of

common facilities like cold storage, cold

chain, effluent treatment plant, warehousing,

power connection, water facilities, sewage

etc.

The creation of these common

infrastructures would benefit the individual

units particularly the small and medium

scale units, because these are expensive tobe set up by any single individual unit.

Therefore a common park with all the

infrastructures would help in the growth of

this industry.

The ministry of food processing industries

has envisaged an initial investment of Rs

120 Crore (Rs 1.2 billion) for setting up thecommon infrastructure in a park.

It is of the view that by providing a grant of

Rs 1,500 Crore (Rs 15 billion) for 30 parks,

Rs 50 Crore (Rs 500 million) for each, the

private sector would be encouraged to invest

up to Rs 9,000 Crore (Rs 90 billion) in

various parks across the country.


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First Food Park in India

KIFPRO KINFRA Food ProcessingPark in Malappuram (Kerala)

It is the first food park in the countryassisted by ministry of

food processing industries Govt of India

It includes:-Yeast manufacturing, softdrinks and mineral water bottling , spirit

from cassava, fruits , fruit juice, fruit

pulp / concentrate , pappad, pickles,chutney, jam, jelly, dehydrated /dried

vegetable, spices, oleoresins, essential oils,

breakfast cereals, weaning foods, nutrition

foods , IQF for fruits and vegetables ,

ready-to-eat snacks/meals ,flour mills,

bakery, noodles, vermicelli, confectionery ,

tomato sauce, ketchup, powder, paste, juice

etc.

Name of Food Park Investment Investor Location

Indian Food Park 13 Crs MOFPI Palavanatham, Tamil Nadu

Nilakottai Food Park 13.5 Crs SIPCOT Dindigul, Tamil Nadu

Western Agri Food Park (P) Ltd 120 Crs MOFPI Pune

Patanjali Food and Herbal Park 200 Crs Baba Ramdev Haridwar

Six food park in Karnataka ------- Proposed Karnataka(Malur, Bagalkot,Jewargi, Belgaum)

MIDC Food Park 4 Crs MIDC Butibori, Nagpur

Source: DEssence Consulting Research


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Growth Drivers for Food Processing Industry

Changing Lifestyle

As far as the processed food market is

concerned, Indian households are closely

knit and the percentage of nuclear families

and working women is very low. Therefore,

while the market itself is one of the largest

in the world, the penetration of packaged

and branded products is abysmally low.

People prefer homemade or fresh products,

which are cheaper than branded products.

However, over the last couple of years,

private players have started taking enormous

interest in the sector, with many MNC's

already testing the waters. Their efforts have

been aided by the fact that urban India is

showing a marked shift towards ready-to-eat

food:

With urban incomes increasing andurban consumers squeezed for time, they

are slowly demanding more of the

products they consume.

Also, the hygiene factor is facilitatinggrowth.

With 200 million people expected toshift to processed and packaged food by

2010,

This presents an opportunity for makers of

branded products like HLL, ITC, Nestle to

convert potential consumers into patrons on

as big a scale as never before.

Large share of wallet:

Food forms the largest component of thetotal consumption expenditure in India

accounting for as much as 51%.

This is highest compared to 9.7% for anaverage American person and 15% for

both Japanese and British. Though with

rising income, the share would go down,

but would increase in absolute terms.

Multi-national companies such as Coca-Cola, PepsiCo, Britannia, Danone,

Nestle, Cadbury, Heinz and Perfettiae

have made their presence felt in India.

Indian majors like HUL, ITC, Dabur too

have lined up investments in this

segment.


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Growth in Retail

The Indian organized retail industryin 2008 is estimated at Rs.17,650

billion and is expected to grow to

Rs.23,500 billion in 2010.

Although organized retail is around 5% of the total market, it is expected

to be seen 35-40% in next 10 years.

The annual growth of the retailmarket in India is expected to be

around 8 per cent. Indian market has

become the most lucrative market for

retail investment in the world.

The great Indian consumer market isstill going strong. Existing middle

class with increasing share of wallet,

rapid urbanization, increase in the

number of working women, large

number of working young

population, changing attitudes, tastes

and lifestyle, globalization ,

indulgence and convenience aspects

are triggering the retail food industry

which in turn will a great boost to thefood processing industry.

This also attracts global retail giantslike Wal-Mart, Tesco, Carrefour SA,

Metro AG etc. to enter the Indian

markets. With increasing number of

shelf space more and more branded

and processed food is finding its wayin retail stores.

Industry estimates the total retailstock in India stands at 34.8 million

sq ft. Another 62.6 million sq ft of

mall space is either proposed or

under various stages of construction

in the next 2-3 years; only 35% of

this supply is coming in Mumbai and

Delhi.

It is expected that the share of thetwo cities to fall from the current

72% of the total stock to 49% by end

of 2011. This will enable retailers to

plan at increasing their penetration

into the Tier II and III markets,

which have lower operating and

rental costs, and are relatively

untapped.

With a sizeable amount of supply inpipeline, the retailers and developers

would shift the focus of Indian retail

market from lifestyle goods to valueretailing. FMCG and food retailing is

likely to be the least affected in this

downturn and some activity is

expected in this sector.


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Some of the Key players in organized retail are:

Sr. No Group Company Tie-up Stores

1 Wal-Mart Pvt. Ltd. Bharti Enterprises One Store Cash-n-Carry in Amritsar

2 Tesco TATA Proposed

3 Carrefour SA Future Group Proposed

4 Metro Ag - 5 Stores Metro (Cash & Carry)


Sr. No. Group Company Stores

1 Future Group

Pantaloon, Big Bazaar, Central, E-zone, Electronic Bazaar, Brand Factory,

Planet Sports, aLL, Top 10, Star and Sitara, Home Town, Collection i,

Furniture Bazaar, Adhaar.

2 RPG RetailFood world, Books and Beyond, Music world, Health & Glow, Spensers,

Cellucom.

3 Reliance RetailReliance Fresh, Reliance digital, Reliance Trends, Reliance Footprints,

Reliance Jewels, Reliance Timeout, Reliance Wellness

4 Tata Retail Westside, Landmark, Fashion Yatra, Croma, Star Bazaar

5 K. Raheja Corp. Shoppers Stop, Hypercity, Crossword, Inorbit mall

6 A.V. Birla More


Sr. No. International Player Indian JV partner Product profile Strategy

1 Danone - Dairy Products

Entered India with

50:50 joint venturewith Yakult, Japan.

2 Con Agra ITCBranded Foods and bulk &processed commodities

Conagra has 34.3 %in ITC Agro Tech

3 Del Monte Bharti Enterprises Fresh fruits& Vegetables 50:50 JV



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Food Retail: Food retail has surpassed the dominating

apparel and accessories sector. Contrary

to the belief that fashion is the largest

segment of organized retail in India,

food & beverages is the major segment,

worth Rs 8,97,000 crore.

Growing at the rate of 30%, the Indianfood retail is going to be and no doubt is

the major driving force for the retail

industry. The percentage of income

spent in households will drive growth in

the food market.

Food accounts for the largest share ofconsumer spending. Food and food

products account for about 50% of the

value of final private consumption. This

share is significantly higher compared to

developed economies, where food and

food products account for about 20% of

consumer spending.

Currently, the retail food sector is Rs.3500 billion and is expected to rise to

Rs. 7500 billion by 2025. Food has the

largest consumption in the Indian

economy and will remain the single

largest category.

Government InitiativesThe government has taken steps to provide

financial assistance for setting up and

modernizing food processing units, creation

of infrastructure, and support for R&D and

human resource development in addition to

other promotional measures to encourage the

growth of the processed food sector.

The government has set a vision 2015, for

the sector which includes:

Promoting a dynamic food processingindustry

Enhancing competitiveness in domesticand international market

Making sector attractive for bothdomestic and foreign market

Achieving integration of food processinginfrastructure from farm to market

It also has following specific targets:

Level of processing of perishables from6% to 20%

Value addition from 20% to 35% Share in global food trade from 1.5% to

3% by 2015

In order to achieve the vision, the

government has taken following steps:


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Priority area: The Government of India

has identified the food processing sector as a

high priority area and has given a number of

fiscal relief and incentives to encourage

commercialisation and value addition to

agricultural produce.

FDI: Automatic investment approval up to

100% foreign equity has been allowed for

larger part of the food-processing sector

except for malted food, alcoholic beverages

and those reserved for small-scale industries

(SSI). 24% foreign equity has been

permitted in small-scale sector. Foreign

investments are allowed in SSI reserved

items under an export obligation in selected

items.

Licenses: The Indian government has

abolished licensing for almost all food and

agro-processing industries except for some

items like alcohol, cane sugar, hydrogenated

animal fats and oils and items reserved for

the exclusive manufacture in the small scale

industry (SSI) sector. This has resulted in a

boom in the FMCG market through market

expansion and greater product opportunities.

Taxes: To further aid the segment, the

government has announced a liberal

corporate tax policy for export and domestic

earnings. Income tax rebate has been

allowed (100% of profits for five years and

25% of profits for the next five years) for

setting up of new agro-processing industries

to process and package fruits and vegetables

(F&V). Export earnings are exempted from

corporate tax. Various states governments

like Himachal Pradesh, Uttaranchal and

Jammu & Kashmir have encouraged

companies to set up manufacturing facilities

in their regions through a package of fiscalincentives. The move towards uniform VAT

has also been considered.

Excise and custom duties: Quantity

restrictions on all food products have been

removed. Peak rate of customs duty has been

reduced from 30% to 25% (excluding

agricultural and dairy products) and duty

structure on designated items has been

rationalised. The import of food processing

machinery is allowed freely with low levels

of duties. Import of capital goods for exports

of agricultural products and their value-

added variants under the Export Promotion

Capital Goods (EPCG) is allowed duty-freeand Foreign Technology Agreement within

norms has been made automatic. This opens

up huge opportunities for large investments

in food and food processing industries in

different fields including up gradation of

technologies, improvement of skills with


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installation of modern machinery and

equipment, especially in areas of canning,

dairy plants, specialty processing.

Food laws: Consumer protection against

adulterated food has been brought to the fore

by the Prevention of Food Adulteration Act

(PFA), 1954, which applies to domestic and

imported food commodities and

encompasses food colour and preservatives,

pesticide residues, packaging, labeling and

regulation of sales.

Food parks: In a bid to boost the food

sector, the Government is planning to set up

agri zones and mega food parks. 30 such

mega parks are coming up across the

country in various cities to attract Foreign

Direct Investment (FDI) in the food-

processing sector. Each food park will have

a cold storage facility, apart from facilities

for sorting, grading, food processing,

packaging and quality control and R&D

laboratories, among other things. The

government has already identified five

locations in Maharashtra, Andhra Pradesh,Punjab and Jharkhand and one in the North-

East region. It is also planning to set up 30

food parks across the country.

Organization under Ministry of Food Processing Industry

1. Directorate of fruits & Vegetable Processing(F&VP)2. Directorate of Meat Food Products3. National Institute of food Technology Entrepreneurship & Management4. Paddy Processing Research Centre

Ministry also interacts with various Nodal Agencies & Promotional organizations1. Agricultural & Processed Food Export Development Authority (APEDA)2. Marine Products Export Development Authority (MPEDA),3. National Co-operative Development Corporation (NCDC),4. Central Food Technological Research Institute (CFTRI )

Source: Ministry of Food Processing Industry


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Major investments in Food Processing Industry

Private investment has been one of the key drivers for growth of the Indian food industry. As we

know food processing industry has been allowed 100 % FDI it has shown substantial growth

which can be observed in the chart:

Industry estimates the total amount of investments in the food processing sector in the pipeline

for the next three years is about Rs. 1,150 billion.

The government has received around 40expressions of interest (EoI) for the

setting up of 10 mega food parks (MFPs)

with an investment of US$ 514.37

million.

In August 2008, the first chocolateacademy in India was opened by Swiss

confectioner Barry Callebaut, making its

fifth foray into the Asia market.

South Korean confectionery giant, LotteGroup, also has plans to set up a

subsidiary in India.

Belgian brewing giant, InBev, hasannounced increased expansion in India,

with a focus on the beer market. Through

its recent acquisition of US brewing giantAnheuser-Busch (A-B), the company

now also owns A-B's Indian subsidiary,

Crown Beers India.

Italian confectionery company, FerreroSpA, has announced plans to invest US$

YearForeign Direct Investment

(Rs. In Crore)

2005-06 182.94

2006-07 441.00

2007-08 719.00

2008-09 400.00

2009-10 945.00Source: Ministry of Food Processing Industry in India

35 million for setting up a mintmanufacturing plant in Maharashtra.

Conglomerate Reliance Industries Ltd hasinvested US$ 1.25 billion in a dairy

project. In August 2008, Reliance

Industries was reported to be mulling a

partnership with UK-based supply chain

solutions provider, Wincanton, for its

efforts focussed on Indias mass grocery

retail (MGR) sector.

Dairy major and ice cream specialist,Amul Dairy, has announced plans to enter

India's US$ 500 million snack food

market.

Texas Chicken, the chicken fast-foodbrand of the US-based Church's Chicken,


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has already opened its first outlet in

Hyderabad and plans to open at least 300

outlets in India over the next 10 years.

The world's third largest pizza chain,Papa John's, plans to open 100 outlets in

different parts of the country with an

investment of US$ 51 million.

Fast-food chain McDonalds is pumpingin US$ 83.4 million on increasing its

footprint in India. ITC is planning to set up a world-class

processing infrastructure in Rajasthan for

an integrated 'cleaning-cum-sorting'

facility for spices like cumin, coriander

and pepper. Moreover, ITC is also

planning investments to automate the

different operations in its supply chain. It

is planning to set up a pepper garbling

and steam-washing facility in Kerala,

apart from a 'blended spices' facility over

the next two years.

Sapat International, a Mumbai-based teacompany, is reportedly in talks with

EPIC, a private equity firm in the UK, for

the acquisition of its stake in Whittard, an

upmarket tea and coffee retailer in theUK.

France-based Belvedere Group, which isthe worlds second-largest vodka

producer, is planning to enter India via

the travel retail channel.

Sr. No. Company Name VC investor Investment

1 KS Oils CVCI, Baring Rs. 450 crores

2 Nuziveedu Seeds( Hyderabad) Blackstone Rs. 400 crores

3 Biotar Industries Ltd. ( Mumbai) Standard Chartered PE Rs. 180 crores

4 Blue Foods( Restaurants) Indivision Capital Rs. 150 crores

5 Mainland China( Restaurants) SAIF Partners Rs 90 crores

6 Jain Irrigation( Jalgaon) IFC Rs. 75 crores

7 Parag Dairy( Pune) Motilal Oswal Rs. 60 crores

8 Ramcides(Chennai) ePlanet Ventures Rs. 25 crores

9 Capital Foods Ltd. Indivision Capital Rs. 25 crores

10 Asian Dhall SAIF Partners Rs. 4 crores

11 Mast Kalandar (Restaurants) Jacob Ballas NA


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Trends in consumption pattern of food

Food On-The- Go

India has had a long tradition of salty

snacking, with a host of regional ingredients

and flavors creating a smorgasbord of

snacks, ranging from fried snacks like chips,

chaklis and samosas to steamed fare like

dhoklas. The snack food industry in Indiais highly fragmented, with the market

dominated by savories sold by local

vendors.

The market is estimated at Rs. 150billion, with 50percent comprising the

organized snacks category.

This category, growing at a healthy 30percent annually, is sub-divided into the

traditional segment (bhujia, chanachur),

western segment (potato chips, cheese

balls) and the newly established finger

snacks segment.

The market in India is diverse and largewith over 1,000 different snack products

and some 300 types of savories. Potato-

based snacks, and in particular potato

chips, are the largest product segment,

holding an 85 percent share of the salty

snack market, followed by snack nuts,

chickpeas and other pulse-based savory

snacks..

Organic Food

Organic foods have been accepted due totheir perceived health benefits over

conventional food.

The organic industry is growing rapidlyand has caught the attention of farmers,

manufacturers and, above all,

consumers.


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Organic foods protect from heart diseaseand cancer, as they contain Phenolic

compounds.

Organic food ensures high food quality,which other conventional foods cannot

give. Many people prefer to grow

organic food in their home gardens,

because it costs about 20% more than

the conventional food.

Fabindia has ventured into the organichealth food products called Fabindia

Organics with no preservatives or colors

added.

24 Lettered Mantra, Indias first organicfood store chain has exclusive stores in

Hyderabad, Bangalore and Pune. Godrej

AgroVets retail product, Natures

Basket, is also looking into the

possibility of test marketing certified

organic produce through its outlets.

HULs 3 Roses brand, with ayurvedic

ingredients is positioned on the mind

sharp category, as its Red Label brand,

with its Natural Care offering.

Health & Wellness Food

This is a trend that plays directly to ourdesire to ingest specific foods or

beverages for the purpose of preventing

or palliating a disease or condition.

From an ingredient standpoint, healthand wellness concerns offer the best

variety of options for processors.

No wonder healthy food is becoming afast-growth category. Rising awareness

and affluence have made health food

products accessible to a larger segment

of the population.

In recognition of these trends, foodmarketers in the country have introduced

a number of new products, spurring the

growth of the health food market.

Several savvy marketers are alreadyriding this trend.

Amul has introduced a range offunctional products, from energy drink

Stamina to Probiotic Ice-creams,

Probiotic Lassi and Curd, and High

Calcium Milk; Reduced Salt Butter


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Convenience Food

Changing lifestyles and the modifiedeating habits of Indias growing urban

population have propelled its processed

food industry.

This has led to a growth in theavailability of processed foods as

manufacturers rush to cater to a growing

demand. Various social changes are

driving this trend, from the growing

number of nuclear families to increased

urbanization and a significant rise in the

number of working women as well as a

growing practice of singles living away

from home for education or work.

According to a study, the Indian Readyto Eat market is estimated to grow to

US$ 727.09 million by 2015 from the

current $ 32.09 million.

Some major players include ITC Foodswith products like Aashirvaad &

Kitchens of India, MTR Foods currently

comprise 22 Indian curries, gravies and

rice,

Amul has products like Ghee ,Shrikhand, Nutramul, Kohinoor,

Rajbhog Foods, Ethnic Kitchens and

Tasty Bite etc.

From a mindset where home- cookedand fresh food was preferred and

housewives insisted on making

everything from snacks to multi-course

meals in-house, today it has become

commonplace to seek convenience and

variety using the vast menu of ready to

cook and eat foods.

Food as Control

Driven by the size zero and thin-is-inrevolution, men and women, boys and

girls are increasingly embarking on

various ill-advised diets to cultivate that

Size Zero figure.

Many companies have started Dietvariant in their product range thatpromises enjoyment without the guilty

side effects.

While the market for low-calorie foodsis small in developing countries, India

already ranks among the top 10

consumers of diet foods.


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Zydus Cadila Healthcare, which isworking on brand extensions, recently

introduced Sugar Free Dlite, a low

calorie fruity drink which is 99 %

calorie-free and claims not to

compromise on its taste quotient.

Amul has come up with its SugarfreeProbiotic Frozen Dessert, Mother Dairy

with its low-fat Dietz ice creams, and

Nestle with Kit Kat Lite.

Eating joints have also introduced a newconcept of diet calorie-controlled food.

VLCC Alive is Indias first calorie kiosk

where each meal promises to be less

than 300 calories. There are also many

more products in the market targeting

such customers.

Instant Energy Food

With long commutes and the need forwork combined with play on a daily

basis have led to consumers needing a

greater infusion of energy than ever

before.

The popular energy drinks in the Indianmarket are Phantom, Red Bull, Effect

and Gatorade.

Due to the large quantities of sugar andcaffeine, these energy drinks give an

instant punch and thus make one feel

energized.

Red Bull is in fact also gaining currencyas a mixer for alcohol in the party

circuit. Amul has launched Stamina,

which is Indias first-ever instant energy

sports drink.

The sports and energy drinks are at theirinfancy stage, but they are expected to

post strong growth in the niche segment.

The consumption of energy bars is alsobecoming a trend among the youngsters.And popular among these are brands like

RiteBite and Nature Valley. These

bars are being marketed as a healthy

alternative to the sugary, fattening

normal chocolate bars.


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Luxury Food Today, food is about many different

things, including lifestyle choices or

values, and affluent consumers are using

food exclusivity to signal their affluence

or arrived status.

Buying a richer version of the same oldthing seems to be the new flaunt mantra.

Many brands are riding this trend byintroducing up-market versions of mass-

market brands.

Parles variant, Milano, is priced at a Rs10 premium over its existing brand in

the market. Britannias Pure Magic and

ITC s Dark Fantasy, a cream-based

Chocolate cookie are also deluxe

versions of their cookies.

Food Classics Ice-cream by MotherDairy is a range of premium ice creams

with more fruit blended with creamy ice

cream.

Cadbury Temptations is a range ofdelicious premium chocolate; Amul has

added Emmental and Gouda.


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Profiles of Major Players in Food Processing Industry

Indian Players

Company Logo Company Products Brief about the company

Dabur Foods

Fruit juice, Cookingpaste, Coconut, Milk,Tomato puree, Lemon

drink, Chilli powder,Honey

Dabur foods is a hundred percent subsidiaryof Dabur India Ltd

Closely held listed company with promotersholding at 78.4% of the total share capital

Dabur has done sales of Rs.241crs in thefinancial year 2007-08, a 19% increase than

the previous year.

AmulDairy products, Icecreams, Chocolates

Founded in 1946 in Anand, Gujarat. Amul is the worlds largest pouched milk

brand in the world.

The annual sale of Amul in the year 2007-08is around Rs.5255.4crs.

GITS FoodProducts PvtLtd

Sweet Mix,Namkeens, Pure ghee,Dairy whitener, Milkpowder

Unlisted private family owned business Exports to UK, USA, Australia, Canada &

Middle East contributing to the extent on 35%

of the revenue.

GodrejIndustriesLtd

Edible oils,Vanaspati,Bakery fats, Fruitdrinks, Fruit Juices,Fruit nectar.

Started in April 2006 as Godrej Beverages &Foods Ltd.

Acquired Nutrine Confectionary CompanyPrivate Ltd. In June 2006.


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HaldiramMarketingPvt ltd

Sweets, Syrups,Namkeens, Crushes,Chips& Papads

Started in 1936, Major share in Namkeen &Snack food market in India.

Strong presence in northern market in Indiaespecially New Delhi.

Exports to USA, UK, Canada, Australia, UAE& Singapore.

MTR FoodsLtd

Ready to eat curries,Frozen food, Ready tocook gravies, Spices,Ice creams, Instantsnack & Dessert mixes

Amongst the top five processed foodmanufacturers in India.

Turnover is estimated at US$ 261 millionwith the export of approximately 10% of total

MTR Sales.

Recently acquired by Orkla, a Norway basedcompany for US$ 80 million.

Parle AgroPvt Ltd

Fruit drinks & Mineralwater

Leading player in the fruit based beveragessegment & bottled water.

Its main product is the mango based fruitdrink Mango Frooti, which has 75% market

share.

Milk Food

Milk powder, baby

food, cheese & other

milk products

The company is a subsidiary of LPInvestments Ltd which is a wholly owned

subsidiary of Jagatjit Industries Ltd.

ITC Ltd

Wheat flour atta,Ready -to-eat meals,Biscuits, Salt, Snacks& Cooking paste

ITC is a listed company with BritishAmerican Tobacco holding 33% stake &

Institutions holdings 50% stake.

ITC entered into branded & packaged foodbusiness in August 2001 with the launch of

Kitchens of India Brand.

ITC entered into confectionery, staple &snackfood items by mid 2002.


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Agro TechFoods Ltd

Wheat flour atta,Popcorn, Edible oil,Vanaspati, French fries& Green peas.

A dominant player in the edible oil &brandedfood segment in India.

ConAgra Foods Inc of USA, worlds thirdlargest foods company along with the Tiger

Brands of South Africa holds a majority stake

in Agro Tech Foods Ltd.

NestleIndia Pvt

ltd

Instant coffee,Condensed milk,Infant food, Dairy

whitener, Chocolates& Confectionaries

Nestle India is 51% subsidiary of Nestle SA(founded 1866), which is today the worlds

largest food & beverage company.

PepsicoIndiaHoldings

Soft drink, Fruit juices& Chips

PepsiCo is formed by the merge of Pepsi-Cola&Frito-Lay IN 1965

Tropicana was acquired in the year 1998 Gatorade was introduced in 2001 by the

merger with The Quaker Oats Company

CadburyIndia Ltd

Chocolates, Hardboiled confectionery,Malt foods, Cocoapowder

In Indian chocolate market Cadbury havestrong brands like Dairy milk, Five star, Perk

& Gems.

Dairy milk is the largest chocolate brand in theworld

75% of the total turnover of Cadbury iscontributed by chocolates & confectionaries


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Case study 1: AMUL

Amul is the largest co-operativemovement in India with 2.2 million milk

producers organised in 10,552 co-

operative societies in 2003-2004.

The country's largest food company,Amul, is the market leader in butter,

whole milk, cheese, ice cream, dairy

whitener, condensed milk, saturated fatsand long life milk.

Amul's genesis was linked to thefreedom movement in India. Sardar

Vallabhbhai Patel, an eminent Indian

freedom fighter encouraged the dairy

farmers from the Kaira district in Gujarat

to form a cooperative to counter the

'exploitatively' low prices offered for

their milk by the monopoly milk supplier

of the area, Polson's Dairy.

The dairy farmers met in Samarkha(Kaira district, Gujarat) on the 4th of

January 1946, and decided to set up a

milk producers' cooperative that would

deal directly with the Bombay

government, the final buyer of their

milk. This was the origin of the Anand

model.

Initially, when the Bombay governmentrefused to deal with the cooperative, the

farmers called a strike. The government

finally relented when Bombay went

without milk for a fortnight.

The successful union registered itself asthe Kaira District Cooperative Milk

Producers' Union Ltd. (KCMPUL),

Anand, in Gujarat in December 1946.

In 1954, when the Bombay Milk Schemerefused to take all the milk thatKCMPUL had produced, the cooperative

found itself saddled with surplus milk.

Apart from marketing milk in andaround Anand, KCMPUL embarked on a

wide range of dairy processing activities.

To differentiate its high quality products,KCMPUL decided to brand its produce.

In 1955, KCMPUL adopted the brandname 'Amul' for its products. 'Amul',

derived from the Sanskrit word

'Amulya', meaning priceless, also stood

for 'Anand Milk Union Limited'.

Amul follows a unique business model,which aims at providing 'value for

money' products to its consumers, while

protecting the interests of the milk-

producing farmers who are its suppliers

as well as its owners.

Despite being a farmers' co-operative,Amul has given multinationals a run for

their money.


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In butter, cheese and saturated fats,Amul has remained the undisputed

market leader since its inception in 1955,

by offering quality products at

competitive prices.

In other categories, Amul has nullifiedits late mover disadvantage through

aggressive pricing, better quality,

innovative promotion, and superior

distribution Gujarat Cooperative Milk

Marketing Federation (GCMMF), the

largest food company in India, recorded

a turnover of Rs 2882 crore ($ 0.65 bn)

in 2003-04.

Its flagship brand 'Amul' was the marketleader in butter, whole milk, cheese, ice

cream and dairy whitener.

GCMMF was the largest cooperativemovement in India with 2.2 million milk

producers of Gujarat organized in 10,552

cooperative societies.

GCMMF collected 5 million litres ofmilk per day from its shareholders who

owned 3.2 million buffaloes, one million

cows and 0.3 million crossbred cows.

The Federation's extensive marketingnetwork comprised 3000 distributors and

500,000 retailers spread across the

country.

The liberalization of the dairy industry in1991 had seen a number of multinational

players like Britannia, Le Bon, Dabon

and Hi-Life enter the sector.

Analysts wondered whether a co-operative with limited financial means

could stand up to the might of these

MNCs, and if its low pricing strategy

would continue to stay relevant.

MNCs like Pizza Hut, Domino's,Hindustan Lever Limited and Cadbury

had also become competitors. Amul had

proved its detractors wrong and firmed

up ambitious growth plans.


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Case Study 2: Lijjat Papad

In 2002, with a turnover of Rs 3 billion,exports worth Rs 100 million, 62

branches and 40 divisions all over the

country, and 42000 members, the Sri

Mahila Griha Udyog Lijjat Papad

(SMGULP) was a women's

entrepreneurial success story in India.

From humble beginnings in a thicklypopulated locality of Mumbai in 1959,

SMGULP has come a long way.

The organization gained recognitionthrough its most famous product- Lijjat

papad. In addition to papads, SMGULP

manufactured other household products

like spices, bakery products and

detergents.

A look at any of the branches ofSMGULP gives the feel of an efficient

entrepreneurial set up.

The key to SMGULP's success lies inthe feeling of oneness that it creates.

Women above 18 years of age canbecome members of SMGULP by

signing a pledge of devotion to the

organization.

At SMGULP, workers are referred to asco-owners and the women who work

there are referred to as sisters.

The member sisters are free to choosethe work they like, rolling papads, or

packing, or preparing the dough.

Payment is made on a daily basis. Thesupervisors constantly check for the

quality and weight of papads.

SMGULP inculcates in its members, "acommitment to earn a legitimate income,honesty, and not snatching the fruits of

another person's income" and adherence

to quality. Stringent rules of cleanliness

and purity are maintained.

The whole manufacturing process isopen to inspection by anybody. A well

laid formula is strictly followed to obtain

products of a fixed standard of taste,

color and size.

In March 1959, seven semi-literatewomen from Gujarat came together to

supplement their family incomes and

create a sustainable source of

employment with the skill they knew -

cooking.

They started out on the terrace of a large,old, residential building called Lohana

Niwas in Girgaum, a thickly populated

area in south Mumbai. This is where the

seven housewives, bored and confined to


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their homes, saw an opportunity to set up

an organization 44 years ago.

These women borrowed Rs 80 fromChaganlal Karamsi Parekh, a member of

the Servants of India Society and a

social worker. The women commenced

business by selling papads.

Within 3 months there were 25 women joined them and within 6 months they

were able to reward themselves with half

gram of gold each with the profit they

had made.

The group used considerable publicitythrough word-of-mouth publicity and

articles in vernacular newspapers.

By the second year of its formation, 100to 150 women joined the group, and by

the end of the third year more than 300

women were rolling papads.

SMGULP is a symbol of the progress ofwomen in developing countries like

India. It took the organization 43 years

to grow from a 7-member team, to one,

which has 42000 members.

The organization not only aims at theeconomic empowerment of women, it

also seeks to raise the standard of living

of women.

SMGULP has taken a major steptowards eradicating evils like poverty

and illiteracy.

Such an organization also forms a vitallink between social development and the

advancement of rural women.

DESSENCE is a full service Boutique Management Consulting firm incorporated in 1998. We assist

Corporate, Mid-Sized Owner Managed Companies and Government Organizations to Build, Grow and

Remain Competitive.

Our highly professional and qualified team includes Management Graduates, Engineers, Accountants,

and Economists who analyze and present a fresh perspective to your business.

Chandni Sahgal : Managing Consultant

+91 9820075332

[email protected]

Shahid Tanwar : Project Leader

+91 9833854580

[email protected]

Sachin Chavan : Project Leader

+91 9967588598

[email protected]

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