Prospects of Food and Dairy Industry in India 1

Importance of Technology 2

Basic Facts Highest producer of milk – Organized dairy accounts for only 30% of milk produced – Only 70,000 Ton cold storage capacity for 90 million Tones produced – Poor yield per cow Second largest cattle population – 5500 registered & unregistered slaughter houses with no chilling, freezing & cold storage facility as hot meat market prevails The Second largest grower of fruits – 15% of world output – Low share of global Exports at 0.5% The Second largest grower of vegetables – 11 % of world output – Low share of global exports at 1.7% – Cold storage facility available for only 10% of produce Lowest cost producer of fruits & vegetables – Low farmer income – farmer suicide 3 Prospects of Food Industry

Facts (cont….) Fifth largest producer of eggs – Poultry meat sold as hot in retail market Sixth largest producer of fish – 20 – 30% damage and no cold storage facility in WB, AP, Goa Low processing – 2.20 % in fruits – 35 % in milk – 6 % in poultry Value addition – 20% India’s current share in world trade of processed foods – 1.60 % Poor lab to land transfer of technology and adoption of new varieties. example of pineapple Source: Task force Report on Development of cold chain in India – GOI/CII APEDA data 4 Prospects of Food Industry

Facts (cont….) Market surplus of fruits & vegetables – 88% –Farmer sells immediately due to perishability & absence of proper infrastructure to keep it for longer period Post Harvest wastage of fruits & vegetables – 25 to 35% valued at over Rs 45,000 crore –Losses as above in India is more than consumption of same in UK Market surplus of food grains– 60% –Farmer keeps some for own consumption, seed purpose and to give to labour as wages –Loss in above equal to annual food grain production in Australia Cost of wastage - 6 times amount spent on food subsidy Farm gate price- 25% of domestic consumer retail price and against 50% in developed countries Source: Task force Report on Development of cold chain in India – GOI/CII 5 Prospects of Food Industry

Key Drivers – To be a Global Agri Super Power Political environment Strong and Credible Coordinating & Promotion agency Strong Corporate leadership Strong Consumer base Optimal Agro climatic conditions Strong Demand 6 Prospects of Food Industry

Role of Key Drivers Attracts Investment Provides Stability Encourages Infrastructural development Political Environment R & D initiatives including development of high yielding varieties Financial & Technical Assistance Extension activities – Grower awareness Strong and Credible Coordinating & Promotion Agency Risk taking abilities Managerial skill development Risk mitigation Strong Corporate Leadership Internal consumption to avoid surplus stock accumulation Encourages Economies of scale Globally Competitive to serve wider base of consumers. Consuming and Processing Industry Favorable Growing conditions Sizeable irrigated acreages. High land productivity, land being a very scarce resource Agro climatic conditions 7

Is India Ready to be a Global Power ? Quality & consistency at grass root not at desired levels Growing consumption based industry – cheaper labour Good governance Favourable policies & spending Focus on Agri/rural sector Strong Corporate leadership Low level of value addition, high post harvest loss Infrastructure - power, irrigation -still developing Weak & ineffective Supply chain Literate workforce Inherent Natural advantage 8 Prospects of Food Industry

Challenges And Strategy For Future …. Food processing Utilization of scarce resources – MORE CROP PER DROP, power etc Varying taste preference within the country Increasing International Competition Non tariff barriers Integrated Food law to remove multiplicity of food laws & regulatory agencies Challenges Indian domestic market Diversifying into new markets and product segments Post harvest loss management itself to provide funds for investment Opportunities Enhancing the sales of Value added products Creating Economies of Scale ‘Lab to Land & Farm to Fork’ linkages Introducing innovative products Strategy 9 Prospects of Food Industry

India …….. A land of opportunities 52% cultivable land as against 11% world wide Unsurpassed Natural Advantages –All the 15 major climates of the world –46 out of the 60 soil types –17% animal, 12% plant and 10% fish genetic resource of the world India is one of the largest producers of wheat & rice, second largest producer of Groundnut, fruits & vegetables and tops in production of mangoes and bananas. India is the world’s largest producer of milk. India has potential to be leading global food supplier if it creates efficient supply chain & marketing. Food processing sector ranks fifth in terms of contribution to GDP Indian urban food market estimated at 350,000 crore Source: FICCI/KPMG study and Task force Report on Development of cold chain in India – GOI/CII 10 Prospects of Food Industry

Can COCHIN in India be a sourcing hub for food products ? Good governance – Strong, Stable and reform oriented government – WTO signatory – Strong economy comparatively resilient to the current economic crisis – Focus on improving the Road connectivity – Vision to solve the power situation – Nuclear energy – Improving relationship with neighboring countries and a more important role in the WORLD ORDER Focus on agriculture & rural sector – Has a Strong agriculture base – Increased out lay for rural spend – Rural economy to be given the next big push to GDP – Annual rural income to increase from 2.8% to 3.6% over next 2 years Source: FICCI – KPMG study 11 Prospects of Food Industry

Towards being the 5 th largest consumer market by 2025 –Large young earning population 50% of population under 25 years of age Ready to experiment and try out new products –Increase in number of upper middle class & middle class by 159 % & 63 % respectively Urban population projected at 40% by 2020 Middle class of 200 – 250 million spread across the country to increase to 580 million by 2025 –Dual income households Higher disposable incomes Ready to try out value added products Source: Mc Kinsey Report May 2007: The Rise of India’s consumer market 12 Prospects of Food Industry

Suggestions …. Reduction of wastage /spoilage to be tackled on a war footing –Accelerated establishment of cold chain networks –Irradiation facilities and pest free warehouses –Encourage SSI units and corporate to set up food processing units Improvement of productivity – both land and manpower –Example the case of Rubber where India has the highest land productivity in the world –Change in cultivation practices such as irrigation for paddy rather than method of flooding the fields Price stability –Make farming remunerative to attract talent and retain farmer interest 13 Prospects of Food and Dairy Industry

Suggestions …… Role for corporate Incentives to Corporate to enter core farming – land ceiling restrictions Increase Mechanization to tackle low availability of labour and to remain a low cost producer Liberalized credit norms for agricultural – production, marketing and infrastructure development Changes in market regulatory framework to allow corporate to establish market yards –At present 7521 regulated markets which lack critical infrastructure Review of legal instruments to facilitate entry in marketing activities 14 Prospects of Food Industry

Dairy Industry in India15

Dairy Industry in India16