The question you should be asking yourself is not ‘why India?’ but ‘why not India?’
So concluded Paresh Parekh, partner at Ernst & Young, in his keynote address to some 200 local and international delegates attending Fresh Produce India 2013 in Bangalore last week.
Shrugging off concerns over the recent slowdown in the country’s economic growth rate, Parekh told delegates to the conference, which took place on 4-6 April, the Indian economy is set to expand faster than its peers in the next decade.
Private consumption accounts for almost 60 per cent of India’s GDP, and by 2025, the country is set to become the world’s fifth largest economy in terms of consumption, up from twelfth in 2010.
“Despite the problems with infrastructure and other areas, anything that is related to the consumer in India is not going to slow down; there is enough demand for many, many years to come,” said Parekh.
Driving this demand is the country’s vast working and consuming population with a low median age, which is set to swell to 820m by 2015.
“You’re dealing with young people; people who are travelling abroad, who are more open to trying new things. That means you can innovate with products in terms of taste or packaging. Food habits are changing and expectations are increasing in terms of food safety, nutrition, freshness and quality.”
India’s per capita fruit consumption is one of the lowest in the world, according to Parekh, who identified huge potential to grow it, especially with health becoming a key driver for urban consumers.
Opening up to foreign entrants?
India’s supermarket industry, like other sectors of the economy, was recently opened up to foreign direct investment (FDI). However, the conditions on entry, which require foreign retailers to invest a minimum of $100m – 50 per of it in back-end infrastructure – have stalled activity.
“It’s now more than six months since the policy on FDI in retail took effect and we are yet to see one single application from a foreign retailer,” said Parekh, who noted most players were taking a wait-and-see approach and seeking suitable partners.
Nevertheless, he said that the “direction is right”, and that the reforms undertaken by the government over the past six months were cause for “comfort”.
Lingering hurdles also remain for foreign entrants to India’s agriculture sector, albeit of a different kind, as Sumit Saran of agribusiness consultancy SCS Group explained in the second session of Fresh Produce India.
“The agriculture sector is now open to [foreign] investment, but sometimes our hearts have remained closed,” said Saran. “But we have to understand that agriculture is not seen as a profession in India, but a way of life; it’s not like investing in telecoms or infrastructure.”
While Indian agriculture has undergone a string of revolutions over the past 35 years – from 'red' to 'green' – Saran reflected that those were production-driven. Nowadays, it is the needs of the consumer –be it taste, nutrition or packaging– that must take priority, he said, adding: “What got you here might not get you there.”
Although India now allows 100 per cent FDI in agriculture, Saran said it was not foreign capital, but technology and expertise that were required to drive the sector forward.
Involvement, not investment
Vivek Dhume, director of leading Indian retailer Future Group, agreed, noting that “involvement, rather than investment” was the key requirement from foreign players. “This market needs a lot of support in so many areas, be it technology, infrastructure, packaging or supply chain.'
One global fruit and vegetable distributor seeking to become more involved in India is Univeg. The CEO of the company’s fresh produce business Francis Kint was on hand to explain its three-pronged approach, which includes exporting to India, importing from India to Europe and the Middle East, and supply chain management and logistics for the local market. “Univeg has made India one of our top areas of growth,” he said, adding that “any investments [by the group] were likely to be in sourcing, distribution or logistics”.
Testifying to the need for foreign players to get involved on the ground in India was Rajesh Prasad of Metro Cash & Carry, the first international retail group to set up shop in India in 2003. Metro now has 15 stores serving more than 1m registered customers in India, and is targeting 100 outlets by 2020.
“India is a chaos economy, and the more you adapt to this the better – as a German wholesaler/retailer this was a huge challenge for us,” he said. “You can’t put your money in and go back. You have to get involved and become a little Indian to get India right.”
Big future for imports
Leading a session on fruit imports, Prasad noted that while the sector was expanding at 25 per cent annually, it remains one of the slowest growing categories of the food and wine business. “Our research suggests only 10 per cent of the Indian population has ever tasted imported fruit, so we haven’t even scratched the surface yet,” he said.
Apples have been the fruit import success story, despite facing a 50 per cent tariff, with volumes almost trebling in five years; from 73,600 tonnes in 2008 to 210,000 tonnes in 2012. But citrus, which accounts for less than 8 per cent of total imports, is “the next big opportunity for imported fruits”, Prasad said.
Kiwifruit is another item with “exponential growth potential” in India, said Giacomo Nocentino of major Italian grower-exporter RK Growers, but he cautioned that developing controlled atmosphere cold storage capacity and modern retail channels in India were vital to market development and product differentiation.
With the lack of cold chain in India, Prasad highlighted ‘managing the hot chain’ as the key factor, notably shielding product from the shock of hot temperatures.
Cold chain a hot topic
A high-powered panel discussed the notorious problem of cold chain in India in the fourth session of Fresh Produce India, including Naresh Jawa of Fresh Supply Chain and Praveen Dwivedi of Future Ventures.
MS Manjunath of Ingersoll Rand International (India) highlighted a lack of understanding as one of the key stumbling blocks for cold chain development in India, particularly at government level. Solutions need to be tailored to the Indian environment with its fragmented landholdings and low productivity levels, which often made investments ‘unscaleable’, he said.
Ingersoll Rand has been developing tailored solutions, such as the first solar-powered cold store with a 20-tonne capacity, and a reefer vehicle with a 500kg payload. It has also designed a ‘district cold chain logistics model’ to apply nationwide that combines the flow of health care products going from cities to rural areas and fresh produce heading in the opposite direction to create a two-way transportation system served by three cold stores and three reefer trucks in each of the 651 districts of the country.
Ending on optimistic export note
The conference concluded with a session on the opportunities for India to broaden its export horizons.
Guy Goves of Deepak Fertilisers and Petrochemicals Corporation explained the company’s mission to develop exports of bananas from India– the world’s largest producer of the fruit– pointing to the opportunity to control industry wastage worth US$1.4bn, and the huge scope to improve farm management practices.
Meanwhile, Sunil Awari of Namdhari Farm Fresh outlined the company’s success story in exporting babycorn among other exotic vegetable lines. Babycorn has proven an ideal crop for Indian farmers, he noted, with its low pesticide requirement, fast growing cycle and year-round availability – and the country has succeeded in claiming significant share in export markets from other key suppliers such as Thailand, aided by its strong and improving air-links.
With many exporting countries facing steep cost increases, India’s competitive cost structure represents a potent force, and Awari epitomised the bright outlook for trade. “The ongoing nationwide infrastructural improvements in India and the young and educated generation that is coming up and entering government give us great optimism for the future of exports.”
The challenges of stagnant prices in export markets and stress on natural resources flagged by Awari also signalled the need to boost productivity and focus on sustainability, however.
Tour programme
Fresh Produce India delegates were able to take part in various organised tours. Following a Welcome Reception on 4 April, a large group went to see the IPL cricket match between Bangalore Royal Challengers (sponsored by the Washington Apple Commssion) and Mumbai Indians, which showcased some of the world’s best cricketing talent.
On Day Three, delegates could choose between the Production Track, which headed out to see the nurseries, farms and facilities of Namdhari Farm Fresh, or the Market Track, which visited Bangalore’s bustling APMC wholesale market, before touring cash and carry and hypermarket formats run by international retail giants Metro Cash & Carry and Auchan respectively.
The tours extended the high-quality networking opportunities that ran through the conference and expo.
“The conference was very interactive and the event gave us good exposure and opportunities to meet all the key exporters and importers to help grow our business,” said Vijay Shami Mistry of NYK Line (India).
Click here to download the presentations from Fresh Produce India 2013.
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