1. Perspective on Sourcing and Processing of Cocoa GLOBAL INVESTORS MEET September 09 th and 10 th,2015 Chennai Trade Centre, Chennai, India

2. Global chocolate market- 95 Billion USD World chocolate market is growing @3% CAGR except Europe In USA & Europe – chocolate as health food Asia has emerged as third largest market for chocolate as well as cocoa production In our country chocolate is considered as indulgence – But Chocolate is expected to replace Colas in India as a guilt-free impulse category over next 5-10 years due to changing consumer behavior & health consciousness in India Chocolate Scenario GLOBAL INVESTORS MEET – September 2015

3. With millennials growing, adult consumption on one hand and chocolate as a hygienic alternative to traditional sweets, increasing prominence in gifting and dark chocolate on a health platform will ensure growth of chocolate market in double digits for at least next ten years In addition, chocolates has usage in adjacencies like biscuits, cakes, coffee, etc., which has grown substantially over the last five years and will continue to grow. Roughly 20% of cocoa is consumed in adjacencies Chocolates in India: Emerging trends GLOBAL INVESTORS MEET – September 2015

4. Consuming ~ 70,000 tons of cocoa beans in the form of chocolate and cocoa based products Producing ~ 19,000 tons of cocoa, Importing 25,000 tons of dry beans, and semifinished/finished products like Cocoa butter(4500 tons), paste (5000 tons)& Powder (8000 tons) Indian Chocolate Market Valued around 1.2 billion USD Growing @ 15% CAGR By 2020- expected that India will become more than 2 billion USD market Indian Cocoa market GLOBAL INVESTORS MEET – September 2015

5. Production trends: – Cocoa cultivation in Kerala stagnant as it is grown as mixed crop and replacement rate of old gardens is very slow – AP is slowly growing and is expected to surpass Kerala in next 4-5 year as cocoa gardens will reach 90% of productive stage Cocoa Growing in India GLOBAL INVESTORS MEET – September 2015

6. Area under cocoa cultivation is 2235 ha Additional 40,000 ha. can be brought under cocoa cultivation out of apporx 4 lakh ha. of coconut gardens Cocoa cultivation is found in : – Coimbatore, Theni, Thanjavur, Kanyakumari, Dindigul, Salem, Tirunelveli and Madurai districts The cocoa market is still unorganized- treated as additional crop not as main crop Looking at Tamilnadu GLOBAL INVESTORS MEET – September 2015

7. Fetches average of INR 200 per Kg earning with a range of Rs 180- 220/-Kg Coconut yield from lands with cocoa intercrop is more than what they could expect from the widely popular intercrop, banana. Rs. 15,000 per acre from banana as intercrop, whereas cocoa cultivation provides double the money Tamilnadu has several advantages over Kerala in terms of drying facility for cocoa beans, which is most important operation for production of quality cocoa – Drying in Tamilnadu before sending for crushing and chocolate making in Maharastra, Karnataka, Hyderabad, Himachal Pradesh, Madhya Pradesh & Kashmir – Our Dharampuram district is well known for such operation Looking at Tamilnadu- some more observations GLOBAL INVESTORS MEET – September 2015

8. If one has to grow more cocoa, do more processing and crushing, how it can be done? – Encouragement of any crop cultivation among farmers is the function of purchase & processing facilities and price – Tamilnadu can produce 10,000 tons p.a. at present productivity of 590 Kg dry beans per year of cocoa from vast area of coconut gardens in coming 3-4 years, if cocoa cultivation starts now Opportunities for Investors GLOBAL INVESTORS MEET – September 2015

9. Areas of investment GLOBAL INVESTORS MEET – September 2015 There are 4 major areas : 1. Cocoa farming and primary processing 2. Cocoa crushing at local level 3. Managing supply chain from farm to fork and 4. Marketing

10. At farm level.. GLOBAL INVESTORS MEET – September 2015 Saplings: Cultivation needs to be encouraged by distribution of sapling. In Madurai farmers are encouraged to take up cocoa farming with supply of free cocoa saplings, fertiliser and pesticide worth Rs. 20,000 per acre for three years from the government Mechanization: Mechanized harvesting : Harvesting of cocoa is regular process, timely harvesting of Cocoa is must for better recovery of beans and labor intensive, therefore a common solution will be highly useful for time & labor saving and allow harvesting of other crop like coconut, palmoil & arecanut by using single or home labors Rodents Control : Appox 20% of crop get losses due rodent damage No assured solution has been invented still, therefore a investment in mechanized control system not only increase the availability of beans but also save huge money Irrigation : Govt can invest in drip irrigation facility in Tamilnadu to save the Cocoa plantation or increment in area. Private players have also an opportunity in this sector

11. Integrating Crushing of Cocoa at producing facility to continuously support cocoa cultivation Value addition like fermentation & drying in wet beans at grower level for quality and better recovery will need initial investment and it will help in reducing the losses to both farmers and buyers Trading of cocoa is another option, – Presently dry beans are traded in simple to complex models across the country – A proper price discovery doesn’t happen and finally producers end with higher loss and buyer with high supply chain cost and uncertainty in supply And therefore, an investment in Cocoa trading platform or spot platform will help both producer and buyer for proper decision making to adjust themselves with demand & supply factor Value addition in supply chain.. GLOBAL INVESTORS MEET – September 2015

12. Use of cocoa products has picked up very fast in unorganized segments like Ice cream & Bakery – Almost 60% of cocoa products like cocoa butter, powder & cocoa pastes is getting consumed by these indulgences Higher growth in adjacent uses of Cocoa products Scope for introduction of new mixes and more in line with innovative consumer preferences GLOBAL INVESTORS MEET – September 2015 Value addition in Processing..

13. Only 3 majors players in the world crushing 60% of cocoa Investment opportunities is high for new crushers who can Import beans and crush at lower cost and re-export cocoa based semifinished products with better margin Govt can play major role in financing them against stocks through banks Hybrid EPZ zone can be created in port area Such initiative will encourage domestic production too and will give penetration to crushers in domestic procurement of cocoa GLOBAL INVESTORS MEET – September 2015 Import & crushing

14. Add on investment can be made in Cocoa area and Tamilnadu can be positioned as ‘Chocolate tourism’ in Cocoa gardens in Tamilnadu This concept is already succesful in coffee growing areas of Karnataka Cocoa tourism..? GLOBAL INVESTORS MEET – September 2015