1. Pankaj Kapoor Managing Director Harrisons Malayalam Limited 28.07.2009
International Summit on Food Processing and Agribusiness
Emerging opportunities and strategic thrust areas for the industry
“food processing & agribusiness - transforming india” Plenary session: -The indian share of the global food market  
Pankaj Kapoor
Managing Director
Harrisons Malayalam Limited

2. Key Drivers – to be an agri super power
Ground Reality
Key Drivers – to be an agri super power
Challenges
Opportunities
Strategy
Suggestions

3. Ground reality – a study in contrast
The 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
Second highest producer of milk
Organized dairy accounts for only 13% 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 house with no chilling, freezing & cold storage facility as hot meat market prevails
Source: Task force Report on Development of cold chain in India – GOI/CII

4. Ground reality (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

5. Ground reality (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 against 50% in developed countries
Story of Fyffee PLc - in Banana Handling and Processing on the ships before final destination of selling.
Source: Task force Report on Development of cold chain in India – GOI/CII

6. Key Drivers – To be a Global Agri Super Power2
Political environment
Strong credible co-ordinating & Promotion agency
Strong Corporate leadership
Strong Consumer base
Optimal Agro climatic conditions 1 3
Strong Demand 5 4

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

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

9. Challenges And Strategy For Future …. Food processing
Opportunities
Utilisation 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
Indian domestic market
Diversifying into new markets and product segments
Post harvest loss management itself to provide funds for investment
Strategy
Enhancing the sales of Value added products
Creating Economies of Scale
Lab to Land & Farm to Fork linkages
Introducing innovative products

10. Challenges Low level of value addition Infrastructure and others
Bottle necks in cold storage including during transit
Seasonality – capacity utilization issues e.g. Himachal apples prod was half of
Non Efficient storage/warehousing, processing & marketing techniques
Non adoption of efficient technology
Infrastructure and others
Shortage of power
High electricity tariff
Low area under Irrigation
High capital cost -Inadequate institutional finance at low rates
High insurance premium in risk coverage
Farm connectivity by road yet to take off

11. Challenges (cont….) Quality and consistency at grass root levels
Inputs delivery not in time
Innumerable varieties
Poor procurement and logistics
Lack of cheap and timely credit
Weak and ineffective supply chain
Non professional management
Low revenue rentals
Non Efficient and competitive retailing
High wastage
Absence of a Successful Business Model.

12. Agri supply chain – a comparison with Developed countries
Consumer
India
Retailer
Trader
Wholesaler
Commission
agent
Consolidator
Farmer
High wastage and low margins
Consumer
Retailer
Developed countries
Wholesaler
Farmer
High investments – Low wastage - better margins

13. Challenges - Hurdles towards Value addition
Wide disparity between peak & lean period arrivals usually ranging from 100 – 150%
Long revenue cycle as products to be purchased in bulk during peak season
Control of markets by few traders and agents who command large storage capacity
Discouragement of farmer – lower returns act as disincentive
Crashing of prices during peak season
Larger intermediaries exerts negative pressure on farmer margin, and deteriorates quality due to multiple handling

14. Bottle-necks in Cold storage & Processing industry
Higher Tax duties including on packaging material
Lower capacity utilisation
Role of cold storage etc – current utilisation 48% of capacity
5100 units with 216 lakh MT capacity
Non adoptive of cost effective technology
High working capital requirement
High cost of finance
Infrastructural constraints
Dependence on intermediaries – inadequate farmer – processor linkages
Source: Task force Report on Development of cold chain in India – GOI/CII

15. 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
Food processing sector ranks fifth in terms of contribution to GDP
Indian urban food market estimated at 350,000 crore
Estimated investment in Food processing sector during 11th plan – 1 lakh crore
Source: FICCI/KPMG study and Task force Report on Development of cold chain in India – GOI/CII

16. Road to Evergreen revolution …….
Horticulture crops – Fruits vegetables and flowers cover 7% of cropped area of the country
India ranks First in production of mango (65% of world) Bananas (11% of world) and papayas
India ranks Second in production of Lime and lemon
Exports quantity increased 4 times & value 10 times in last 15 years
Move to invest in 10 mega food parks in the country
Indian food processing industry averaging a growth of 10%
Source: Task force Report on Development of cold chain in India – GOI/CII
Mc Kinsey reports

17. Can 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 agri & rural sector
Has a Strong agriculture base
Increased out lay for rural spend
Rural economy to be give 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

18. India is preparing to take off …….
Indian growth story …….
Strong Corporate leadership
Indian is already …….
IT Hub of the world
Auto and auto ancillary hub to the world
Telecom hub
Acquiring global companies
India managers at the Helm of many Fortune 500 companies
India is preparing to take off …….

19. Impetus by Govt
Included in the list of Priority sector lending by banks since 1999
Most of processed food Exempted from purview of licensing under the industries (Development & regulation) Act, 1951, except items reserved for small scale sector & alcoholic beverages
Excise duty for processed fruits & vegetables, food mixes etc. – NIL
Excise duty on reefer vans reduced from 16 to 8%
Reduction in customs duty on food processing machinery
Tax breaks
Move towards GST

20. Towards being the 5th 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

21. 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

22. 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
Tax holidays and incentives
Excise exemptions for CAPEX items.

23. The Requirement: Striking a Balance
Size
Solutions
Cost
Flexibility
Speed
Partnerships
Its no about price, lead time, innovation but about striking a balance between all the requirements

24. Conclusion India - Sone ke chidiya
Food sector – the highest multiplier effect of any industry – 2.4
Tripling the size of the industry would generate
Direct employment – 28 lakh and Indirect employment – 74 lakh
Thrust in agriculture to be provide the next push to GDP and prosperity
Enhanced export earnings to compensate for any slow down in IT related exports
India - Sone ke chidiya

25. A few words about us ……

26. Harrisons Malayalam Ltd …… over the years
HML’s predecessors Malayalam Plantations Limited and Harrisons & Crosfield Limited sterling companies incorporated in England – history of 150 years.
In 1979, these companies incorporated as Indian Companies under the names Malayalam Plantations (India) Limited and Harrisons & Crosfield (India) Limited.
In 1984, the two companies merged to form Harrisons Malayalam Limited.
HML became part of the RPG Group in the year 1989.
RPG Group - one of India's largest industrial conglomerates, with over 20 companies in its fold, spread over 6 business sectors with an annual turnover over USD 3.25 Billion
Winner of the maximum number of awards at the “The Golden Leaf India awards” (TGLIA) for quality teas

27. Vital Statistics ………. Largest plantation company based in South India.
Single Largest Private Sector Employer in Kerala.
HML has hectares of land under its fold
6000 hectares - in Tea, 8000 hectares - in Rubber
Single largest producer of Natural Rubber in the Country
Second largest producer of Tea in South India.
Largest Corporate grower of Pineapple
Presence in other horticulture crops – banana, passion fruit, cocoa, coconut, arecanut and spices
Largest exporter of Teas in South India – Some Important customers -Twinings – UK, Saralee – Netherlands, Elink Schurmann – Rotterdam, May Co – Russia, Baeshan – Saudi Arabia , A F Jones – Sri Lanka

28. Caring for People and environment – The HML way …….
An equal Opportunity employer with 7700 men and 8800 women workforce
Winner of FICCI awards thrice for corporate initiatives in family welfare as a result of its Comprehensive Labour Welfare Scheme – aimed at improving the quality of life of the employees and their dependents.
Pioneer in corporate social responsibility in Kerala with initiatives such as “Rakshita” a centre for development of children and adults with multiple disabilities
Providing free medical aid for underprivileged in Rural Kerala.
The only company in this sector to bag the Kerala State Pollution control award for its factory on more than one occasion emphasizing the responsibility and initiative taken by the company in preserving the natural resources for future generation.

29. HML financials ……… 40% Growth Year on Year basis 2007-08 2008-09
% increase YOY
Sales ( Rs lacs)
20864
29244 40
EBITDA (Rs Lacs)
2056
2280 11
PBT (Rs Lacs)
699
801 15
40% Growth Year on Year basis

30. ASPIRATION STATEMENT
To be a World class agri-based profitable business company.
To make HML an exciting place to work.
Agri- based means that at least 75 % of our Top line to come from Agri based operations/Products.
Profitable means ROCE to be above cost of capital always and positive net-worth.

31. Open for discussions

32. Thank You