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Emerging Market Scenario-

Changing Food Basket & Space for

Value Addition

PRESENTATION BY

Veerender Thakur , General Manager

Indian Food Industry

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INDIAN FOOD MARKET

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Second largest arable land in the world

Diverse agro-climatic zones across the country, Round the year

sunshine

Potential to cultivate a vast range of agricultural products Large marketable surpluses and abundant raw material for

processing

Vast pool ofskilled manpowerin research and extension

THESE ADVANTAGES BEING LEVERAGED , FOR IN D IA TO B E A

LEA D ING FOOD MA R K ET IN TH E WOR LD

Indian Agriculture

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9/21/2013

4

The Indian Paradox

We are among the top few producers of many agricultural commoditiesin the world

Yet our share in world food trade is only 1.6 %

The post-harvest losses of fruits and vegetables are estimated to be 25to 40 %, amounting to more than Rs. 30,000 crores

Yet less than 2 % is processed !

We have a middle class of 250-300 million people with adequatepurchasing power to buy manufactured goods

Yet value addition to agricultural products is less than 7%

More than 220 million tonnes of food grains production

Yet more than 130 million people go to bed hungry every day !

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5

Low Value Addition

47

58

53

42

~70

79

~94

~30

21

~6ndia

Brazil

Thailand

New Zealand

US A

Comparison of value added in agricultureand food processing*AgricultureFood processingPer cent

33875

Source:Indiainfoline; Bloomberg

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6

Adding Price Without Adding Value !

Consumer

Retailer

Sub-Wholesaler

Wholesaler

Market levelcommission agent

Consolidator/villagelevel trader

Small /marginal farmer

< 25%

< 6%

< 10%

< 8%

< 10%

Total mark-up in the chainTotal margin - 60 to 75 %Margin from farmers towholesaler - 30-35%Wastage - 15-25%Transportation - 10% approx.

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What we need

Transition of Indian agriculture from a Low input-Lowoutput farming system to aHigh input High

output system

Increase Value Addition

Cut costs by efficient Logistics Management

Provide Consumer Satisfaction by giving him value

at a price he can afford

Be Internationally Competitive

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Food Processing - Current Scenario

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The Food Processing industrycurrently valued at about US$ 100

billio

&is estimated to grow at 9-12 per cent, basis estimated GDP growthrate of >8 per cent and increasing disposable income

Value addition of food products is expected to increase from the

current 8 per cent to 35 per cent by the end of 2025

Fruit & vegetable processing, which is currently around 2 per cent of

total production will increase to 25 per cent by 2025

All these developments will need extensive logistics, quality storage

and transportation

Indian Food Processing Industry -Trends

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Growth Trends for Major Food Products

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-2015

Years

Volum

e(MT)

Meat and Poultry Seafood (export) Frozen F& V Cheese

Imported F & V Butter Ice Cream Chocolate

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Number of Food Processing Units in Organized

Sector

Fruit & Vegetables Processing Units 5293

Fish Processing Units 568 (+482 Cold Storage

cum icing Units)

Meat Processing Units 171

Milk Products Processing Units 266

Flour Mills 516

The indus try is est im ated to grow at 9-12 per cent, on the

streng th of 8% GDP grow th du r ing last 5 years

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Food Processing Industry :Market Size & Growth Matrix

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Expanding the market and new channels : Regional to national footprint ( Sudha dairy, Bihar), Rural marketing (HUL), Franchiseemodel (APDDCF, Andhra dairy)

International players : Entry of International players in food processingand value added services - Del Monte, Walmart, Carrefour

New & Innovative Products:Pepsicos Nimbooz, Aliva snacks, Minutemaid from Coca cola, Maggi Ataa NoodlesStrengthening of linkages :

Development of back end - Contract farming, investment inmodern storage

Emergence of third party logistics

Indian Food Processing Industry -Trends

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Rise in disposable incomes

Changing Lifestyles and Aspirations

Increasing penetration of organised retail and branded food products

Increase in demand for Functional Foods

Increasing Nuclear Families and Working Women

Increasing spends on health foods

Govt policies and incentives for the food processing industry

Industry Growth Drivers

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The emerging Segments

Frozen foods Frozen vegetables

Poultry

Meat and Fish products

RTC & RTE food products

Convenience foods segment

Breakfast cereals & Health foods

Organic

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Frozen Food Industry

-Opportunity for Cold Chain

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Privi leged and Str ict ly Confident ial

High Volume

High Volume Chilled Fresh Fruit (Apple, Pears, Grapes) - 1 MMT annual growth 5%

Fresh Vegetables (Off season produce) 1 MMT annual growth15%

Potato 12 million MT

Packaged milk estimated 12 15 % of Annual production of105 million tonsannual growth 5%

Milk (Metro) @ 15% of production annual growth 10% Yoghurt & Butter 50,000 MT

Meat & Seafood 0.5 MMT

High Volume Frozen Frozen Meat, Poultry & Seafood 539,000 MT

annual growth 5% Ice-cream 200 million litres annual growth 12-15%

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Medium & Low Volume

Medium volume

Imported Fresh Produce 80,000 MT annual growth 10%

Frozen Vegetables 40,000 MT annual growth 20%

Cheese 10,000 MT annual growth 10%

French Fries10000 MT annual growth 15% Chocolates 5,000 MT, Dough 20,000 MT

Floriculture 24 million stems

Low Volume

Pharmaceuticals Vaccines

Photographic Film

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Status of Cold Chain in India

Commodity Production(million MT)

Volume movingthrough CC (mill

MT)

ReeferTrucks

Cold Storage(Million MT)

Milk 105 N A 20,000* 0.07

Meat &

Poultry

6.5 5.39 5000 5.39

Fisheries 6.1

Fresh F & V 188

Potato 34.4 0 18.2

* Includes insulated vehicles

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Refrigeration Market In India

Cold Storage

13%

Coolers

52%

Freezers

12%

Transport

Refrigeration

4%

Industrial

Refrigeration

19%

Cold

Storage

50%

Transport

50%

Segments

Delhi

26%

Mumbai

24%Bangalore

7%

Chennai

5%

Kolkata

11%

Jaipur

2%

Chandigarh

1%

Others

24%

Geographical Distribution

Milk & Milk

Products

24%

Marine

Products

22%Fruits &

Vegetables

19%

Meat & Poultry

14%

Ice cream

10%

Others

11%

Cold Chain Market by Products

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Service Trends in Logistics

Inhouse

33%

Out Source

12%

Both

Inhouse &

Outsource

55%

Most companies forced to establish own logistics as reliable

service providers not available

Cold

Storage

5%

Transportati

on

50%

Both

45%

95% Transportation including refrigerated is outsourced

Services Outsourcing

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Trends in CCM Logistics Outsourcing

Integrated service providers End users and organized retailing prefer integrated service providers.

For ex: Baskin Robbins, McDonalds, Walmart

FMCG companies, who needs to cover large geographical

areas are more dependent on large number of small serviceproviders and Clearing and Forwarding Agents due to

interstate taxation

Another reason for not outsourcing to integrated service

providers is due to policy of pushing products and collecting the

money by sales personnel of brand owner.

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Satisfacti

onwith

ServiceProviders

Not Satisfied

36%

Satisfied

64%

Most FMCG companies are not happy with their transport service

providers

IntentiontoSwitch

Yes

43%

No

57%

Only 36% users are dissatisfied but 43% are willing to change theirservice providers indicating tremendous latent demand mainly due to

Non availability of services during peak period

Lack of choice

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Product Movement

Fresh Fruit & Vegetables

Temperate (Apples & Pears) from

North to countrywide

Grapes from Mid West to

countrywide mainly North

Banana from West to North Vegetables from concentrated

pockets of production criss cross

Small and big traders drive

business

Frozen Fruit & Vegetables

Peas are shipped from North

countrywide

Other vegetables are shipped

similarly

French Fries enter via Mumbaiand are shipped to metros mainly

Players include Safal, Chambal,

McCain, Vadilal, Sumeru, Al

Kabeer

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Product Movement

Meat & Poultry

Meat Export is major

commodity group, move from

Delhi to Mumbai in large

quantity (200000 MT)

Local distribution movement,for instance, to Punjab from

Rajasthan

Poultry has both regional and

national movement on

demand supply equation

Fish & Seafoods

Exporters use own stores

and trucks for economy

Movement from coast to

hinterland

Andhra ships seafood & fish

countrywide

Gujarat ships seafood to the

North

Local traders

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Product movement

Chocolates & Other (RTC

RTE)

Shipped nationally by

Cadburys, Amul, Nestle

Pharma & Vaccines

Concentration of industry in

Gujarat, Maharashtra,

Andhra Pradesh, Himachal

Pradesh

Shipped nationally

Films

Kodak, Fuji

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Product Movement

Chilled Dairy Products

Countrywide milk plants ship

milk, curd, paneer, flavored milks

Butter is shipped nationally

Cheese is shipped nationally

Players include Brittania, Amul,

LeBon, Mother Dairy, Heritage,

Aavin, Vijaya, Verka, Vita, Nestle

Ice-cream Works on mainly 250 300 km

plant radius

Only Amul & Baskin Robbins ship

pan India

Players include Walls, Vadilal,

Mother Dairy

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M

ovementRoutesof

Snowman

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Value Added Services - Cold Chain

About 10-15% of food passes through cold chain andsegment is growing at 15-20% annually

Main products are: Dairy Products (ice cream, butter,

cheese, paneer); Fresh and Frozen F&V; Meat & Poultry;

Fish & Marine products; Confectionary and Chocolates Opportunities for primary and secondary distribution. Hubs

at strategic location will facilitate city distribution

Also caters to other sectors like pharma, photo films etc.

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