Veerender Thakur, General Manager Indian Food Industry Emerging Market Scenario- Changing Food Basket & Space for Value Addition PRESENTATION BY Veerender Thakur, General Manager

Indian Food Market

Indian Agriculture 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 of skilled manpower in research and extension These advantages being leveraged, for India to be a leading food market in the world

The Indian Paradox 4 Yet our share in world food trade is only 1.6 % We are among the top few producers of many agricultural commodities in 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 25 to 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 adequate purchasing 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 ! 4 3/27/2017

Low Value Addition 5 Agriculture Comparison of value added in agriculture and food processing* Food processing Per cent India Brazil Thailand New Zealand 33875 USA 5 Source: Indiainfoline; Bloomberg 5

Adding Price Without Adding Value ! Total mark-up in the chain Total margin - 60 to 75 % Margin from farmers to wholesaler - 30-35% Wastage - 15-25% Transportation - 10% approx. Consumer Retailer Sub-Wholesaler Wholesaler Market level commission agent Consolidator/village level trader Small / marginal farmer < 25% < 6% < 10% < 8% 6

What we need… Transition of Indian agriculture from a “Low input-Low output” farming system to a “High 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 7

Food Processing - Current Scenario

Indian Food Processing Industry -Trends The Food Processing industry currently valued at about US$ 100 billion & is estimated to grow at 9-12 per cent, basis estimated GDP growth rate 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

Growth Trends for Major Food Products

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 industry is estimated to grow at 9-12 per cent, on the strength of 8% GDP growth during last 5 years

Food Processing Industry : Market Size & Growth Matrix

Indian Food Processing Industry -Trends Expanding the market and new channels : Regional to national foot print ( Sudha dairy, Bihar), Rural marketing (HUL), Franchisee model (APDDCF, Andhra dairy) International players : Entry of International players in food processing and value added services - Del Monte, Walmart, Carrefour New & Innovative Products: Pepsico’s Nimbooz, Aliva snacks, Minute maid from Coca cola, Maggi Ataa Noodles Strengthening of linkages : Development of back end - Contract farming, investment in modern storage Emergence of third party logistics

Industry Growth Drivers 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

The emerging Segments Frozen foods RTC & RTE food products Frozen vegetables Poultry Meat and Fish products RTC & RTE food products Convenience foods segment Breakfast cereals & Health foods Organic

Opportunity for Cold Chain Frozen Food Industry - Opportunity for Cold Chain

High Volume High Volume Chilled High Volume Frozen 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 of 105 million tons annual 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% Privileged and Strictly Confidential

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 Fries –10000 MT annual growth 15% Chocolates – 5,000 MT, Dough – 20,000 MT Floriculture 24 million stems Low Volume Pharmaceuticals Vaccines Photographic Film Privileged and Strictly Confidential

Status of Cold Chain in India Commodity Production (million MT) Volume moving through CC (mill MT) Reefer Trucks Cold Storage (Million MT) Milk 105 N A 20,000* 0.07 Meat & Poultry 6.5 5.39 5000 Fisheries 6.1 Fresh F & V 188 Potato 34.4 18.2 * Includes insulated vehicles

Refrigeration Market In India Segments Geographical Distribution Cold Chain Market by Products

Service Trends in Logistics Most companies forced to establish own logistics as reliable service providers not available Services Outsourcing 95% Transportation including refrigerated is outsourced

Size of Monthly Transportation Outsourced by Major FMCG Companies

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 service providers 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.

Satisfaction with Service Providers Most FMCG companies are not happy with their transport service providers Intention to Switch Only 36% users are dissatisfied but 43% are willing to change their service providers indicating tremendous latent demand mainly due to Non availability of services during peak period Lack of choice

Product Movement Fresh Fruit & Vegetables Frozen 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 Mumbai and are shipped to metros mainly Players include Safal, Chambal, McCain, Vadilal, Sumeru, Al Kabeer Privileged and Strictly Confidential

Product Movement Fish & Seafoods 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 Privileged and Strictly Confidential

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 Privileged and Strictly Confidential

Players include Walls, Vadilal, Mother Dairy 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 Privileged and Strictly Confidential

Movement Routes of Snowman

Value Added Services - Cold Chain About 10-15% of food passes through cold chain and segment 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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