Indian Food Industry

Emerging Market Scenario Changing Food Basket & Space for Value Addition
P R E S E N TAT I O N B Y Ve e r e n d e r T h a k u r, G e n e r a l M a n a g e r

INDIAN FOOD MARKET

Indian Agriculture

Second largest arable land in the world

Diverse agro-climatic zones across the country, Round the year sunshine

Potential to cultivate a vast range of agricultural products

Large marketable surpluses and abundant raw material for processing

Vast pool of skilled manpower in research and extension

T H E S E A D VA N TA G E S B E I N G L E V E R A G E D , F O R I N D I A T O B E A LEADING FOOD MARKET IN THE WORLD

The Indian Paradox

We are among the top few producers of many agricultural commodities

in the world

Yet our share in world food trade is only 1.6 %

The post-harvest losses of fruits and vegetables are estimated to be 25

to 40 %, amounting to more than Rs. 30,000 crores

Yet less than 2 % is processed !

We have a middle class of 250-300 million people with adequate

purchasing power to buy manufactured goods

Yet value addition to agricultural products is less than 7%

More than 220 million tonnes of food grains production

Yet more than 130 million people go to bed hungry every day !

4
9/21/2013

Low Value Addition

Comparison of value added in agriculture and food processing* Per cent India Agriculture

Food processing

~94 79 ~70 58 47 53 21 ~30 42

~6

Brazil

Thailand

New Zealand

USA

33875

Source:Indiainfoline; Bloomberg

Adding Price Without Adding Value !

Total mark-up in the chain
Total margin Margin from farmers to wholesaler Wastage Transportation Consumer

60 to 75 %
30-35% 15-25% 10% approx.
Wholesaler

Retailer

< 25%

Sub-Wholesaler

< 6%

< 10%

Market level commission agent Consolidator/village level trader Small / marginal farmer

< 8%

< 10%

What we need
Transition of Indian agriculture from a Low input-Low

output farming system to a High input High output system Increase Value Addition Cut costs by efficient Logistics Management Provide Consumer Satisfaction by giving him value at a price he can afford Be Internationally Competitive

Food Processing - Current Scenario

Indian Food Processing Industry -Trends

The Food Processing industry currently valued at about US$ 100 billion & is estimated to grow at 9-12 per cent, basis estimated GDP growth rate of >8 per cent and increasing disposable income Value addition of food products is expected to increase from the current 8 per cent to 35 per cent by the end of 2025 Fruit & vegetable processing, which is currently around 2 per cent of total production will increase to 25 per cent by 2025 All these developments will need extensive logistics, quality storage and transportation

Growth Trends for Major Food Products

900000 800000 700000 600000
Volume (MT)

500000 400000 300000 200000 100000 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-2015 Years Meat and Poultry Imported F & V Seafood (export) Butter Frozen F& V Ice Cream Cheese Chocolate

Number of Food Processing Units in Organized Sector

Fruit & Vegetables Processing Units Fish Processing Units Meat Processing Units Milk Products Processing Units Flour Mills 5293 568 (+482 Cold Storage cum icing Units) 171 266 516

The industry is estimated to grow at 9-12 per cent, on the strength of 8% GDP growth during last 5 years

Food Processing Industry :

Market Size & Growth Matrix

Indian Food Processing Industry -Trends

Expanding the market and new channels : Regional to national foot print ( Sudha dairy, Bihar), Rural marketing (HUL), Franchisee model (APDDCF, Andhra dairy) International players : Entry of International players in food processing and value added services - Del Monte, Walmart, Carrefour New & Innovative Products: Pepsicos Nimbooz, Aliva snacks, Minute maid from Coca cola, Maggi Ataa Noodles Strengthening of linkages : Development of back end - Contract farming, investment in modern storage Emergence of third party logistics

Industry Growth Drivers

Rise in disposable incomes Changing Lifestyles and Aspirations Increasing penetration of organised retail and branded food products Increase in demand for Functional Foods Increasing Nuclear Families and Working Women Increasing spends on health foods Govt policies and incentives for the food processing industry

The emerging Segments

Frozen foods Frozen vegetables Poultry Meat and Fish products RTC & RTE food products Convenience foods segment Breakfast cereals & Health foods Organic

Frozen Food Industry Opportunity for Cold Chain

High Volume
High Volume Chilled

Fresh Fruit (Apple, Pears, Grapes) - 1 MMT annual growth 5% Fresh Vegetables (Off season produce) 1 MMT annual growth15% Potato 12 million MT Packaged milk estimated 12 15 % of Annual production of 105 million tons annual growth 5% Milk (Metro) @ 15% of production annual growth 10% Yoghurt & Butter 50,000 MT Meat & Seafood 0.5 MMT

High Volume Frozen

Frozen Meat, Poultry & Seafood 539,000 MT annual growth 5% Ice-cream 200 million litres annual growth 12-15%

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Medium & Low Volume

Medium volume Imported Fresh Produce 80,000 MT annual growth 10% Frozen Vegetables 40,000 MT annual growth 20% Cheese 10,000 MT annual growth 10% French Fries 10000 MT annual growth 15% Chocolates 5,000 MT, Dough 20,000 MT Floriculture 24 million stems Low Volume Pharmaceuticals Vaccines Photographic Film
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Status of Cold Chain in India

Commodity Production (million MT) Volume moving through CC (mill MT)

Reefer Trucks

Cold Storage (Million MT)

Milk
Meat & Poultry Fisheries Fresh F & V Potato

105
6.5 6.1 188 34.4

NA
5.39

20,000*
5000

0.07
5.39

18.2

* Includes insulated vehicles

Refrigeration Market In India

Segments

Industrial Refrigeration 19% Transport Refrigeration 4% Freezers 12%

Cold Storage 13%

Transport 50%

Cold Storage 50%

Coolers 52%

Geographical Distribution
Others 24% Chandigarh 1% Jaipur 2% Chennai 5% Delhi 26%

Cold Chain Market by Products

Others 11% Milk & Milk Products 24%

Ice cream 10%

Meat & Poultry 14%

Bangalore Kolkata 7% 11%

Mumbai 24%

Fruits & Vegetables 19%

Marine Products 22%

Service Trends in Logistics

Inhouse 33% Both Inhouse & Outsource 55%

Out Source 12%

Most companies forced to establish own logistics as reliable service providers not available

Services Outsourcing
Cold Storage 5% Both 45% Transportati on 50%

95% Transportation including refrigerated is outsourced

Trends in CCM Logistics Outsourcing

Integrated service providers End users and organized retailing prefer integrated service providers. For ex: Baskin Robbins, McDonalds, Walmart FMCG companies, who needs to cover large geographical

areas are more dependent on large number of small service providers and Clearing and Forwarding Agents due to interstate taxation Another reason for not outsourcing to integrated service providers is due to policy of pushing products and collecting the money by sales personnel of brand owner.

Satisfaction with Service Providers

Not Satisfied 36% Satisfied 64%

Most FMCG companies are not happy with their transport service providers

Intention to Switch

Yes 43% No 57%

Only 36% users are dissatisfied but 43% are willing to change their service providers indicating tremendous latent demand mainly due to Non availability of services during peak period Lack of choice

Product Movement
Fresh Fruit & Vegetables
Temperate (Apples & Pears) from

Frozen Fruit & Vegetables

Peas are shipped from North

North to countrywide Grapes from Mid West to countrywide mainly North Banana from West to North Vegetables from concentrated pockets of production criss cross Small and big traders drive business

countrywide Other vegetables are shipped similarly French Fries enter via Mumbai and are shipped to metros mainly Players include Safal, Chambal, McCain, Vadilal, Sumeru, Al Kabeer

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Product Movement
Meat & Poultry Meat Export is major commodity group, move from Delhi to Mumbai in large quantity (200000 MT) Local distribution movement, for instance, to Punjab from Rajasthan Poultry has both regional and national movement on demand supply equation

Fish & Seafoods Exporters use own stores and trucks for economy Movement from coast to hinterland Andhra ships seafood & fish countrywide Gujarat ships seafood to the North Local traders

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Product movement
Chocolates & Other (RTC RTE) Shipped nationally by Cadburys, Amul, Nestle Pharma & Vaccines Concentration of industry in Gujarat, Maharashtra, Andhra Pradesh, Himachal Pradesh Shipped nationally Films Kodak, Fuji

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Product Movement
Chilled Dairy Products
Countrywide milk plants ship

Ice-cream
Works on mainly 250 300 km

milk, curd, paneer, flavored milks Butter is shipped nationally Cheese is shipped nationally Players include Brittania, Amul, LeBon, Mother Dairy, Heritage, Aavin, Vijaya, Verka, Vita, Nestle

plant radius Only Amul & Baskin Robbins ship pan India Players include Walls, Vadilal, Mother Dairy

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Movement Routes of Snowman

Value Added Services - Cold Chain

About 10-15% of food passes through cold chain and

segment is growing at 15-20% annually Main products are: Dairy Products (ice cream, butter, cheese, paneer); Fresh and Frozen F&V; Meat & Poultry; Fish & Marine products; Confectionary and Chocolates Opportunities for primary and secondary distribution. Hubs at strategic location will facilitate city distribution Also caters to other sectors like pharma, photo films etc.

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