Agri-business

(Focus area: Food processing)

Domestic Export Employment 2023 Market Size
Market Size
USD 3.54B USD 635 M 0.3 M USD 8.23 B

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3 Part C: Detailed analysis of the 16 sectors
3.1 Agro-processing
To consider increased outward orientation, the lens of analysis of agri-business sector in this report is focused only on the export-oriented agro-
processing segments. It is worth mentioning that, BIDA also identifies agro-processing under the name agro-business.

Changing the momentum of urbanization due to global economic growth and dietary shift in both rural and urban
clusters have transformed the structure of food/input system and market worldwide. As part of the food system, agro-
processing has also confronted the transformation. FAO defines agro-processing as a subset of manufacturing and mid-
stream off-farming activity which processes agricultural outputs into food, beverages, tobacco, textiles and clothing,
wood products and furniture, paper products, and rubber products (FAO, 2017). The figure below illustrates the
position of agro-processing in the core value chain of food/industrial inputs:

Figure 7: Global value chain of food/industrial inputs.

Under agro-processing, the focus of this report will center on consumable or edible food items which are processed
from cultivated fruits, vegetables, and crops. The focused four major categories are Dry food (puffed rice,
confectioneries, biscuits, potato-chips/flakes), Frozen Fruits and Vegetables, Processed Fruits and
Vegetables (jams, jellies, pickles, canning, pulp, juices, sauces, and ketchup) and Spices.
3.1.1 Market size: agro-processing industry
Being a labor-abundant country, Bangladesh has always been considered as a potential growth spot for agro-processing
industry (FAO, 2017). BAPA (Bangladesh Agro Processors’ Association) claimed that the agro-processing industry has
been enjoying remarkable progress during the past couple of years in both endogenous and exogenous market (The
Independent, 2018). For an initial understanding of the agro-processing industry, this segment describes the overall
industry including all agro-processing items.

Overall Market Size

Referring back to Agricultural Value Chain Study of
2011 by USAID/Bangladesh, the estimated market size
of agro-processing was $2.2 billion while the growth
rate from FY 2004-05 to FY 2010-11 was 7.7 percent
(Katalyst; Innovision, 2016). However, after 2011, no
aggregated national market size estimation study was
commissioned for agro-processing industry explicitly.
Through qualitative investigations on export trends
and insights from industry insiders, it has been
observed that the market has seen a sharp inclination
in both demand and supply-side after 2014. With a

Figure 7: Yearly size of agro processing industry by year yearly growth rate of 15 percent from 2014 to 2018,
the market size has reached approximately $4.81
billion, combining both domestic and export volume (Inspira Extrapolation, 2019). Rising dual-income households with
increasing purchasing power has become one of the key driving factors for the growth of the agro-processing sector in
the domestic market. The most immediate impact of this change has affected the sector because people are spending

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more on ready-to-cook and ready-to-eat items. At the same time, rapid urbanization has also created a vacuum for long-
shelf-life/retort pouch-based products in the domestic market (Future Startup, 2019).

3.1.2 Export growth potential

The sector has fetched export earnings of around $635
million in FY 2017-18. From FY 2012-13 to FY 2017-18,
the export market has grown at a rate of 44.44 percent.
Current statistics and growth rates indicate that the
value of the agro-processing export market will cross $1
billion by FY 2019-20 where nation’s apex trade body of
agro-processors (BAPA) is also ambitious to achieve the
target.
Industry insiders have identified that the availability of
raw materials, cheap labor and government supports
were the key growth fuel behind the success. In the FY
2017-18, the major exported products were juice, Figure 8: Export trend of agro-processing products by year.
drinks, puffed rice, snacks, spices, chanachur, biscuit,
pickle, frozen vegetables, vermicelli, potato flakes/starch, jam-jelly, candy, mustard oil and flattened rice (Financial
Express, 2018). At present such products are exported to 144 countries, however, the market is highly concentrated in
a few specific places where either a large Bangladeshi migrant base is present (the Middle East and UK) or food pattern
is similar due to cultural similarities (India).
The country currently has more than 400 food processing firms but only a dozen of them are export-oriented (BAPA,
2018). Among these exporters, the market leader (PRAN Group- one of the large conglomerates expanding factory
across South Asia) alone has captured $333 million from the international market in FY 2016-17 which was
approximately 66 percent of national agro-processing export earnings.
3.1.3 Employment
According to a leading agro-processing market player, approximately 300,000 people are employed in the processing
sector. The growth of employment has been 15 to 20 percent per year (CAGR) for the last five years. As per LFS 2016-
17 (Labor Force Survey- Bangladesh), the female employment proportion in the sector is around 22.86 percent8.
According to BIDS Study Report on the labor market and skill gap in Bangladesh, the proportion of unskilled workers is
99.90 percent in this industry.
3.1.4 Government support
3.1.4.1 Fiscal incentives
● Cash incentives and export subsidies for selected export products ranging from five percent to 20 percent.
● 20 percent cash incentive is allocated for processing of locally produced fruits and vegetables.
3.1.4.2 Other government incentives
● Tariff-free access to the European Union.
● This sector has been prioritized in 2018-21 export policy.
● Able to take ESF fund which will provide eight-year term loans at two percent simple interest and is able to
cover up to 49 percent of project cost (The Financial Express, 2018).
3.1.5 Environmental and compliance practice status quo
Among the food processing companies of Dhaka, Rajshahi, and Chattogram area, only 14 percent and four percent of
enterprises are HACCP compliant and ISO certified respectively. Only 30 percent of the enterprises hold the certificate
of BSTI9 (BAPA, 2019). Processing companies are facing barriers in getting the certificate due to lack of knowledge
regarding the issues and the complexity of the systems. Only two percent of the four hundred food processing

8 Only contains female employment ratio of Food and Beverage products.

9 Bangladesh Standardization and Testing Institute (BSTI): The country’s standardization body which determines the national
standard for any product and issues certificates after examining the quality of products.
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companies use the wastewater treatment plant. Although a valuable organic fertilizer can be prepared from the waste
material, none of the companies are using the waste material to prepare compost. (BAPA, 2017).

3.1.6 Future growth potential and challenges

3.1.6.1 Fruits: next growth fuel of the agro-processing industry
According to FAO, Bangladesh has maintained 11.5 percent annual growth in terms of fruit production for the last 18
years. Unfortunately, due to the absence of storage and processing capacity, Bangladesh wastes up to 45 percent of its
fruit production as post-harvest losses every year. However, with an improved market system this loss can capture a
significant amount of revenue from both domestic and international market (The Financial Express, 2018). A few
selected fruits with high potential in export include the following.
● Pineapple: Recently Bangladesh has tapped into the global sliced Pineapple market. The national production of
Pineapple has also grown by 11,000 tons in FY 2017-18 compared to last fiscal year which gave confidence to
the market players. Many key informants were confident that the export of pineapple juice and the slice will be
soared but due to global market price fluctuation, the export declined by 69 percent in FY 2017-18 (The Daily
Star, 2018).
● Jackfruit: Processed Jackfruit along with soya foods have been considered as an alternative of red meat in the
global vegan market while the global market will be $7.54 billion by 2025 (The Financial Express, 2018).
Bangladesh has tapped in the market recently as a few companies have started exporting jackfruit-made osmotic
dehydrated food and jackfruit seed powder in the EU market.
3.1.6.2 Biscuit: 3-fold growth rate in export earnings
Currently, the market size of biscuits and confectioneries is around $597-717 million which is growing at a rate of 15
percent annually (Light Castle BD, 2019). Around 100 auto and semi-auto biscuit factories are now operating in the
country. The net export earnings of biscuits stood at $80.41 million in the first six months of the FY18-19, almost
double of last year’s earnings ($43.09 million) and is expected to triple in the next few years.
3.1.6.3 Potato: Wasting two million metric tons of export worthy potato
Vegetable exports have fetched $63 million in FY 2016-17 which is equivalent to 12.6 percent of total agro-processing
export earnings (The Daily Sun, 2018). On the other hand, one of the staple foods potato is losing two million metric
ton of export worthy surplus production every year where up to 70 percent value addition (one-kilogram potato worth
$0.18 can earn $12.05 if it can be processed into flakes and chips) is possible in the domestic market with proper
processing (Dhaka Tribune, 2019).
3.1.6.4 Low investment appetite beyond traditional sourcing region
Majority of the agro-processing industry is based in the Northern part of Bangladesh. Due to the absence of basic
infrastructure and resources, the agro-processing industry did not invest in other potential zones. Being limited to a
specific region, the agricultural output produced in other region cannot be mobilized under the processing industry.
Fruits and cash crops from Chattogram and large-scale mung production from Barishal can be portrayed as an example
of such a case (Katalyst; Innovision, 2016). However, industry insiders believe Jamalpur Economic Zone (an EZ situated
in Northern Bangladesh) can be utilized as a border economic zone for agro-processing following the growth blueprint
of Food Innopolis10, Thailand. Food Innopolis is an exclusive hub designed for the food industry which promotes
research and innovation.
Case Study: Chattogram Hill Tract (CHT) Agricultural crops | The untapped oasis
The CHT region is situated in the South-Eastern parts of Bangladesh which consist of three districts named Khagrachari,
Rangamati, and Bandarban. CHT’s land has a congenial agro-climatic environment for growing a number of high-value
cash crops (spices, herbs, nuts, ginger, turmeric, and cashew) and fruits (pineapple, mango, papaya, orange, banana, and
jackfruit). In 2015, CHT alone produced more than 150,000 metric ton of mango, jack fruit and litchi (IJSAR, 2019). On
the contrary, the region has virtually no food-processing industry (FAO 2013). On an average, a substantial
amount of fruits and vegetables are being wasted per season as there is no cold storage facility in the hill tracts
(Rangamati Chamber of Commerce and Industries, RCCI, 2019). Political movement/conflict in the region is also having

10 To learn more, please visit: http://foodinnopolis.or.th/en/home/

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considered a major hindrance. The area is an ethnically, culturally, and topographically diverse region of Bangladesh with
12 ethnic communities with distinct tribal cultures and traditions. The ethnic minorities in this region have the potential
to engage in entrepreneurial activities and developing trading and business relationships. Processing, packaging, branding
of farm-based produce and service delivery- all have potential as ethnic food-processing enterprises (ICIMOD, 2016).
3.1.6.5 Import dependency of packaging materials and machinery
The Industry is also import-dependent for packaging materials of the processed foods. Processors import sanitary cans
from Thailand, returnable bottles from India and crown caps from Sri Lanka. Lug cap for jam jelly bottles is imported
mainly from India to cater the local demand. High-end sophisticated machinery such as vacuum fryer is also imported as
only light machinery is produced in Bangladesh.
According to a leading export-oriented processing company, of the total produced processed food, 70 percent of the
raw materials are sourced locally and the rest 30 percent (packaging and other chemicals) are imported from abroad.
Case of fuel import for running the processing plants are also found in the industry.
3.1.6.6 Quality control and assurance
The global market has been always concerned about the quality of processed food. To be a global exporter, Bangladesh
has to diversify the portfolio of its consumer. Countries in an advanced economy follow certain standards to maintain
the quality of processed food/vegetables. To operate in such a market, Bangladesh has to ensure the quality according to
the standard. However, the current situation of the industry indicates, in the case of processed food quality management
in both endogenous and exogenous market, Bangladesh has lagged behind in terms of resources and logistics (The
Financial Express, 2017). As indicated by key informants of this research, one of the most pressing concerns for the
agro-processors is perhaps the food safety issue. Due to the absence of quality testing in national boundary, Bangladeshi
processed food items required third country scanning which put up to 65.5 times of extra cost burden on exporters
(The Daily Star, 2017). Moreover, the presence of lead in the turmeric powder and pesticides and formalin in mango
juice has reduced consumer confidence in some products and the processors have seen a decline in sales of these
products nationally.
3.1.6.7 Lack of a nodal agency11 for agro-processing sector
There is no dedicated nodal agency/body to look into the development of the sector, considering the multi-billion-dollar
global food-processing business and its direct benefit to the farmers. According to BAPA, entrepreneurs have to visit
different ministries, including industry, agriculture, food, and commerce, to get things done (The Financial Express BD,
2017). Export peer like India has a dedicated ministry to supervise food processing industries named Agricultural and
Processed Food Products Export Development Authority (APEDA).
3.1.6.8 Promoting local starch
Compared to 2017 with 2016, the cassava production has increased by close to 200 percent but still, it can hardly meet
two percent of local demand (The Daily Star, 2019). In 2012, ADB has sanctioned a loan worth $25.1 million to a local
conglomerate to develop starch value chain in Bangladesh including farming and production promotion (ADB, 2019).
Due to lack of high yield variety, local production of starch is not growing up. Private actors expressed dissatisfaction as
BARI has not been able to deploy researchers and develop high-yield cassava variety as experts in the Philippines and
India had done.

11 Nodal Agency: A government or state agency, sometimes an appointed commission, is a permanent or semi-permanent organization in the machinery of
government that is responsible for the oversight and administration of specific functions
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