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VALUEVALUE ADDITIONADDITION ININ PAKISTANPAKISTAN -CHALLENGES AND OPPORTUNITIES

Prof. Dr.Prof. Dr. FaFaqqqqirir MuhammadMuhammad AAnnjjjj umumDirector GeneralDirector General

NationalNational InstituteInstitute ofof FoodFood ScienceScience && TechnologyTechnology

University of Agriculture

1Faisalabad, Pakistan

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Contents

Value Addition

Food Processing

Food Processing-Worldwide

Food Processing-Pakistan

Scenario of Major Food Crops

Challenges and Opportunities

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Value Addition

• Value addition ‐ process of increasing the economic value andconsumer appeal of an agricultural commodity

• It is a production/marketing strategy driven by customer needsandand preferencespreferences

• “Value‐added” is used to characterize food pproducts convertedfrom raw materials through processes that give the resultingproduct an “incremental value” in the market place e

itherthroughthrough higherhigher priceprice oror expandedexpanded marketmarket

• Exampples of “value‐added pproducts ” ‐Jams,, Ketchup,p, sqquashes,,

cheeses and pre‐cooked meats are considered

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Why Value Addition?

• Make more money: value added agricultural product has moremarket value than raw commodity

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• Meet changing tastes and preferences of consumers ‐convenience, quality, safety, health, variety, price, social andenvironmental consciousness

• Compete by differentiating a product in a highly competitivemarket

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Food Processing and Value Addition

• Food processing involves any type of value additionto the

agricultural produce starting at the post harvest level– The value of farm products can be increased through any of the

route singly or in combination

Biologgical

• Cleaning & cooling • Extractng

• Processing • DryyinggChemicaChemica

• Distributing l Physical • Smoking• Churning

• Labeling• CulturingCulturing

• PPackkagiing• Grinding• Hulling

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Traditional Approach to Food Processing

SmallFarmers

Retailing Middle Man

SSmallll SScalleMiddle Man

Process

Large ScaleProcess

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Food Processing: Worldwide

• The size of global processed food industry is estimated to bevalued around US $3.5 trillion and accounts for three‐fourth of

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the global food sales

• MostMost ofof thethe growthgrowth isis takingtaking placeplace inin developingdeveloping countriescountries inin

Eastern Europe, Asia and Asia‐Pacific, which are experiencingincrease in population

• The huge market in ASEAN countries alone, with over 550million people, is a vast potential waiting to be untapped

• Despite its large size, only 6% of processed foods are tradedacrossacross bordersborders comparedcompared toto 1616%% ofof majormajor

bulkbulk agriculturalagriculturalcommodities

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Food Processing: Worldwide …

Employment in Food Sector• Fortune 500 indicate Food Sector

• US: 12 million

is ggrowingg 15.9 % annuallyy for • EEurope: 22.55 milliillion

the past 5 years

•• MajorMajor foodfood processingprocessing industriesindustriesare American and European

• CConveniience prodducts suchh asdried instant soups, Food Marketreconstituted fruits and jjuices, • USUS = USUS $$ 100100 billi

onbillionshelf cooking meals are • India: US $ 69.4 billion

becoming popular throughoutthethe worldworld

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Food Processing: Worldwide …

• Japan is the largest food processing market in the Asianregion followed by India and China

• One of the most technically advanced food‐processingindustry globally is Australia as the products produced are ofiintternatitionall sttanddardds hhaviing comparatitivelly llow priices

• Countries in the Sub‐Sahara African region, Latin Americaandd some parts off Asiia contiinue to bbe on thhe llower‐endd offtechnology for competence in food items

• Europe, North America, and Japan are on the higher‐end oftechnology, with a sharper shift towards convenience and

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diet foods.

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% Growth- - -

2 1 1 - 1 1 22 3

0 5 0 5 0 5 0 5 05 0

PipelinessEngineerinng, Constructionn

Pettroleum RefininggMining, Crude-Oil productionn

OOil and Gas Equipment, ServicessEnergyy

FCoonstruction and FFarm Machineryy

MetalssFFood Productionn

F o

oInduustrial Machineryy

Netwwork and Other CCommunicationss …a

Railroadsss d

tHealth Caree: Insurance andd Managed Caree

Financiaal Data Servicessg P

Health Caree: Pharmacy andd Other ServicessInternet Servicees and Retailingg

r rMMedical Productss and Equipmentt

o oEElectronics, Electtrical Equipmentt

w T c

Food ServicessFood Connsumer Productss

e o eFood aand Drug Storess

r p s

s sHoousehold and Peersonal Productss

Chemicalssi

I2 n i

n

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Scienntific, Photograpphic, and Controll…ND Utilities: GGas and Electricc

0 dU PPharmaceuticalss

u gS

0T

:Aerospaace and Defensee

R8 s

YHealth Care: MMedical Facilitiess

Wholesaleers: Health Careet W

Innformation Technology ServicessF r

iWholesalers: Electronics and OOffice Equipmentt

o e o

AirlinessWholesaalers: Diversifieddr s r

t l

u dTeleccommunicationss

Sppecialty RetailerssBeveragess

n wEntertainmentt

e i

Computers, OOffice EquipmenttPackagging, Containerss

5 dSecuritiess

0 e

0Insurance: Life, Health (mutual))

…

Semicconductors and OOther Electronicc…Generaal Merchandiserss

Motor Vehicles and PartssCommercial Bankss

Hotels, CCasinos, ResortssInsurance: Lifee, Health (stock))Home Equipment, Furnishingss

Real Estatee1

Automotive Reetailing, Servicess

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0Insurancee: Property and CCasualty (stock))

Diverrsified Financialss

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Food Processing: Pakistan

• Food Industry is the 2nd largest in Pakistan

• Accounts for 27% of its value‐added production & 16% of thetotal employment in manufacturing sector

• With an estimated 169 million consumers, Pakistan holds theworld’s eight largest market

• More than 1000 large scale food processing enterprises in

Pakistan

• 75% of rural‐ based food manufacturers are in so‐calledinformalinformal sectorsector (difficulty(difficulty inin accessingaccess

ing rawraw materialmaterial, financefinanceskills, knowledge & management)

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• Pakistan s food sector is changing significantly with an

inclinedinclined shiftshift inin lifestyleslifestyles andand traditionaltraditional eatingeating habitshabits

• Average consumer spends 42% of one’s income on food

• Retail sales of processed foods is expanding by 10 % per

anum and currently are estimated at about US$1.4 billion, ofwhihichh iimportedd prodducts account ffor US$$325 milliillion

• Suppermarkets are ggainingg in ppoppularityy as a shoppppingg venueand now account for about 10% of all retail food sales

• InIn addition,addition, PakistanPakistan nownow hostshosts numerousnumerous westernwestern‐stylestyle fastfast

food chains reflecting a rising popularity with such eatingstyle

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Food Processing Units in Pakistan

Type of processing industry Units Employment

FFruitits andd VVegettablble 155155 2323,500500

Cereal based 1246 45,000

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EdibleEdible oiloil 321321 34,00034,000

Sugar sector 427 25,000

Livestock 68 28,5000

Total 1989 154,250

Source:Source: EstimatesEstimates basedbased onon reportreport ofof thethe APOAPO MulttryCountry StudyStudy MissionMissionon Rural Based Food Processing Industry, Abdul Hafeez Chaudhary, APO(2004). (Mt = Metric tons; Mnt = Million tons; Mnl = Million litres)

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• The ability of food processors at industrial level dependsabsolutely on the availability of raw materials

• Pakistan is a major producer of commodity and industrialcrops (such as wheat, rice, sugarcane and oilseeds)

• Livestock and horticultural products are also importantelements in aggriculture and pprovide additional raw materialsfor processing and export

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Cereals

• Wheat is the leading food grain in Pakistan, 9042 thousands

hectareshectares areaarea underunder cultivationcultivation andand 8080%% farmersfarmers involvedinvolved(Federal Bureau of Statistics, 2009‐2010)

• RiceRice isis secondsecond mostmost importantimportant cerealcereal cropcrop withwith 28832883 thousandthousand

hectares of cultivated area (Federal Bureau of Statistics, 2009‐2010)

•• HarvestHarvest andand postpost‐‐harvestharvest losseslosses ofof wheatwheat andnd otherother grainsgrains

range between 15‐18%

• Vallue addddedd prodducts: bbiscuits, starchh, gllucose, etc.

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Fruits and Vegetables

• Great demand in the international market, especially

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mango, apples, dates and citrus

• 12% share in agriculture value addition

• Citrus and mango account for 48% of all fruits produced in Punjab

•• BalochistanBalochistan producesproduces thethe secondsecond largestlargest volumevolume ofof fruitsfruits, mainlymainly

apples and dates

• High post harvest losses (20‐40%), Only 3‐5% is being processed

• Value added products: Jams, squashes, syrups etc.

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Oil Seeds and Vegetable Oils

• Self‐reliance in edible oils during 1947 to 1960

• Major sources of edible oils are:• Cottonseed• SunflowerSunflower oiloil• Canola oil

• Rapeseed oil

• Import started in 1960; Now the local production is only 29% andimport is 71% (Palm oil constitutes > 90 % of oil imports)

• Higher per capita consumption: 11.9 Liters per capita

• Value added products: specialty fats, shortenings, margarine

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Sugarcane

• One of the major cash crop in Pakistan providing raw materialfor sugar based products

• Its share in value added of agriculture and GDP are 3.6 percentandand 00..88 percent,percent, respectivelyrespectively..

• During 2009‐10, area under sugarcane cultivation was 943

thousandthousand hectareshectares

• Sugar industry waste like mud, molasses can be used

toproduce several value added products using biotechnologicaltechniques

• Value added products: White sugar, brown sugar, refined

sugar, chipboard and paper18

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Livestock Sector

• Livestock accounted for about 50% of GDP of agricultural valueadded and about 9.4% of the GDP

•• Net foreign exchange earnings from livestock products and by‐productsproducts accountsaccounts forfor 1111%% ofof thethe overalloverall exp

ortexport earningsearnings ofof thethecountry

• PPakikisttan iis probbablbly one off ththe world’ld’s lleastt effifficiientt users offlivestock resources since home‐based slaughtering generall

ydoes not make most efficient use of the by‐products

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Milk and Dairy

• Pakistan is the 5thh largest producer of milk in the world, with 45billions liter annual production (Ministry of Livestock and Dairy

Development, 2009‐2010)

• Only 4‐5% milk is being processed

• Value added dairy products commonly consumed in Pakistan: wholemilk powder, skimmed milk powder, condensed milk, ice cream,bbutttter, ghhee

Source:Economic

Survey of

Pakistan

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Meat & Poultry

• Poultry sector is one of the organized and vibrant segments ofagriculture industry of Pakistan

• This sector generates employment (direct/indirect) for about11.55 MM peoplepeople

• Poultry meat contributes 23.8% of the total meat production inththe counttry

• Meat sector is highly unorganized in Pakistan, though local andexport potential exist

• ValueValue addedadded productsproducts:: Gelatin,Gelatin, sausagessausages etcet

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c..

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Barriers to Value Addition in Pakistan

Insufficient Raw Material Supply• Dislocation of manufacturing units•• FluctuationFluctuation inin rawraw materialmater

upplysupply

InadequateInadequate SafetySafety StandardsStandards PoorPoor FinancialFinancial SupportSupport• Poor safety/ hygiene at workplace and for • Problem in extensio

consumers commercial banks• OperationOperation ofof oldold machinerymachinery withoutwithout • ReluctanceRelucn lendinglending rere‐

preventive measures investments• Adulterated food products and inadequate

packaging

Poor Technical Choices Lack ofErratic Inputs & Poor Artisan Skills Innovation

P h if hi d• Problem in potable water supplies • Poor choice of machinery• Poor literacy level and skills of artisan processes

22• Non‐existent innovation

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Major Challenges as a Nation

• Population growth

• Ageing population

• Urbanization

• Food for health

• FFoodd ffor diffdifferentt age groups

• Food for pleasure and convenience

• Health disorders: CVD, Obesity, hypertension, diabetes

•• FoodFood SafetySafety

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Challenges in Agro-Processing

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• Post‐harvest losses due to lack of storage and transportinfrastructure• Food grains : 15‐18%• Fruits and vegetables: 20‐40%.

• Inability to manage raw material supply

• Inaddequate coldld chhaiin ffaciliilitiies

• Poor financial support

• Lack of investment in the supply chain

• Lack of training facilities for farmers and processors24

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Challenges in Agro-Processing ….

• High excise duty on packaging

• Varying standards for food products

•• PoorPoor oror nonnon‐‐existentexistent standardsstandards ofof safetysafety inin thehe workplaceworkplace andandfor the consumer

• Poor qualility off thhe prodducts

• Weak reggulatory system

• Poor technical choices and a lack of innovation

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Challenges in Agro-Processing …

• Frequent failure or interruption of power production/pprocessingg belts

• Unequipped food analysis laboratories

• Inefficient market structure

• Lackk off addequate traiinedd manpower

• Lack of coordination links with academia, industry andresearch organizations

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Opportunities of Food Processing in Pakistan

• Halal meat products

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• Seed / grain drying, aeration and storage technology

• AApplilicatition off exttrusiion ttechhnollogy iin cerealls

• Rice drying technology for obtaining higher head rice yield

• Efficient pulse processing technology

• Rice par‐boiling technology

•• PrePre‐coolingcooling technologytechnology forfor fruitsfruits andand vegetablesvegetables

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Opportunities of Food Processing in Pakistan

• Fruits and vegetables canning, grading, and packingtechnologygy

• Cold stores for potatoes, citrus, apples and other foods

• Modified atmosphere technology for fruits and vegetables

• Apriicot andd ddates ddryiing andd processiing techhnollogy

• Small‐scale fruit jjuice technologgy for the remote fruitgrowing areas

•• ValueValue additionaddition inin milkmilk ee.gg. milkmilk powderpowder, cheesecheese, yoghurtyoghurt andand

ice‐cream

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Suggestions

• Establish agro‐processing training institutes

• Bulk handling and storage technology at farm levels

• CreditCredit byby banksbanks andand financialfinancial institutionsinstitutions

• Setup of "Food Parks” and “Technology Transfer Centers”

• Develop cottage industry on priority basis

• Establish small food processing units at district level

• Encouragge direct marketingg of pproducts byy the farmers

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• Revise Pakistani food standards for quality of food products

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Suggestions

• Use of local material in packaging

• Improving process efficiency and decreasing losses

• VVallue addddedd prodductts rathther ththan ffreshh prodduce

• Promote export of indigenous products for ethnic groups

• Linkages between industry and research organizations

• Focus on brand building

•• CreatingCreating awarenessawareness amongamong consumersconsumers

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