Friday, March 31, 2006

The Food Processing Industry:The Next Growth Sector

The food processing industry is badly in need of infrastructure and the government is offering several incentives and tax breaks for foreign investment. Currently, 100% FDI is permitted in the food processing sector and the Union Government is likely to allow 51% FDI in food retailing, covering the sectors of dairy, marine, poultry, fruits and vegetables by end 2006, it is estimated.

According to the McKinsey FAIDA report, India produces 146 million tonnes of fruit and vegetables, second only to China. The Associated Chambers of Commerce and Industry of India (ASSOCHAM) estimates that the food processing industry, which is currently worth USD 325.4 billion, is likely to grow at 8% per year till 2007 and 10% per year by 2010. It is estimated that USD 108.4 billion was annually lost to wastage due to outdated technology, gaps in the distribution chain and widespread use of commission agents.

Only 6% of fruit and vegetable production in India is currently processed while the target is 20%. To increase the country’s share in the global market to 3% from its current 1%, the government is opening the industry to international companies to improve infrastructure, cold storages, packing and transportation.

It was due to this lack of an efficient supply chain as well as a continuous cold chain that India’s first international food retailer, Nanz which was backed by Delhi-based Escorts Group, US-based Marsh Supermarket and Nanz AG from Germany went out of business.

An empowered group of ministers have already given the go-ahead to the proposal of FDI in food retailing. This move will allow foreign investment in food retailing, grant infrastructure status to the food processing industry, access to priority sector lending and reform taxation laws.

The main push behind opening up the agri-business sector is to reduce wastage, which amounts Rs. 50,000 crores annually. Minister for Food Processing Subodh Kant Sahai said that the food-processing and agri-business industries should get an “infrastructure category” status that has been given to airports, to attract investment to set up cold chains and other supply chain components.

On a related note, there’s a great article, This brigade will charge India into glory! in The Indian Express by Vivek Bharati, an advisor to the Federation of Indian Chambers of Commerce and Industry (FICCI) about how the food processing industry can bring about changes in rural India the same way that IT has changed urban India.
India has potential to grow most crops and become the food bowl of the world. Aggressive forays into the global market through export of processed food, organic food and fresh produce can unleash linkages that can redefine India’s countryside by ushering in a second green revolution.

Wednesday, March 29, 2006

The non-importance of things

The most important things in life aren’t things.
--Anthony J. D’Angelo
Founder of The Collegiate Empowerment Company and creator of The Inspiration Book Series

The things that count most cannot be counted.

As obvious as it is to know the importance of these simple words, its often lost in the race to compete, to be better, to improve and so on. Sometimes I wonder if people really understand the life they are hankering for, the one full of things, brands and assorted collections of items to show to the world that they have arrived. Are they really worth it? For the last 5 years and especially the last 2, I have embarked very seriously on having less, with one exception (*more on that later). I don't need 50 t-shirts and 10 pairs of jeans when I really only wear 10 and 2 respectively. The simplicity of this life is incredibly liberating. I still love to buy new stuff, only now I make sure I give away as much as I buy.

*I strongly feel that one can never have enough books, so that is our one exception to this rule. We love to buy, to read, to collect, to admire them in the bookshelves, to despair when we will actually get the time to read all these books and most of all the knowledge that they are ours.One of our dreams is to start a library with our books. Someday,'ll happen.

Friday, March 24, 2006

Retail on my mind

There's been tremendous interest/chaos/upheaval/excitement in the Indian Retail sector lately. While the government has permitted FDI in single brand retailing, the real meat lies in opening up the sector for international players like Wal-Mart, Tesco and Carrefour to enter to set up supermarkets, hypermarkets and convenience stores. Indian players like Pantaloon Retail, which owns Big Bazaar, Food Bazaar, Central etc are opposed to FDI as they want a head start on Wal-Mart which they feel is only being fair to domestic retailers.

Reliance announced in late January this year that it will be entering the retail sector and sent everyone into a tizzy. Reliance can become the Indian Wal-Mart, they know the market and have the resources--how do other Indian retailers compete with that.

What I find is the most interesting thing of all, is the while the communists, socialists and purists are busy trying to keep everything “foreign” out, Indian consumers are lapping up any and all kinds of retail experiences, whether domestic, foreign or alien, all they want is a good deal. While some are worried about Gurgaon maxing out on malls, well, there will be some casualties, but the real consumer is in the tier II and III towns, just waiting to be wooed.

Two interesting articles from Reuters to read; on India'’s fast changing retail scene and how Indian retailers are adapting to change and on the Wal-Mart debate .

Tuesday, March 21, 2006

Who next in Reliance Retail?

Reliance Retail will have four main divisions--food, non-food, services and agri-business. A CEO will head each vertical. They will report to the central leadership team, which, at present comprises of Mukesh Ambani and Manoj Modi. According to sources, food and groceries is planned to be the largest division, contributing around 15-16 percent of the target turnover. Another 13-14 percent is expected from consumer durables.

Reliance Retail is picking the cream of the crop from across the industry, paying an estimated Rs 4 crore to each of its division heads. It’s been an extremely interesting game to watch……who will join the Reliance bandwagon next?

Here’s the chronology:

January 28, 2006

  • Rajeev Karwal joins as CEO of the consumer durables division of Reliance Retail. According to sources, Karwal will be in charge of appliances, electronics, telecom, computer software & hardware and photography.

February 11, 2006

  • Gunender Kapur, head of Unilever Nigeria, joins Reliance Retail as head of the food and grocery division.

March 1, 2006

  • Raghu Pillai, CEO Home Solutions, Pantaloon Retail will be joining as chief executive of retail operations.

March 13, 2006

  • Sriram Srinivasan will join as head of Reliance Retail fashion apparel retail business. Srinavasan was the founder of Indus-League Clothing, which owns the brands Indigo Nation and Scullers, now owned by Pantaloon Retail and therefore now a competitor.

March 17, 2006

  • Bijou Kurien, chief operating officer (COO) of Titan Industries, has quit the company to join Reliance’s retail venture. A long-timer at Titan, Kurien will be heading the lifestyle division of the retail venture.

Rumors doing the rounds:
  • Rajeev Bakshi, chairman of Pepsico India, may be joining the company.
  • Ninu Khanna, former MD of Bombay Dyeing, may be joining as head of the FMCG division.

Monday, March 13, 2006

Thought for the Day

If everybody is thinking alike, then somebody isn’t thinking.

--General George S. Patton

Thursday, March 09, 2006

Mind your manners

Several advertisements lately are pushing social responsibility more than sales. Is it financially feasible for these companies to ask users to reduce usage of their products or just a slight aberration in their advertising game plan? Are companies using these prominently displayed advertisements on billboards merely as a way to increase their brand or do they want results that are directly proportionate to their spending?

In the modern world, advertising has become a mode of communication rather than just a sales medium. The most effective way to communicate with consumers, present and potential, is to connect with them while not necessarily pushing their products. This connection with the consumers is the essence of successful advertising.

These new advertisements for Hutch and DNA are prominently displayed on billboards across Bombay. Hutch is telling us to behave responsibly and politely and to not to take pictures without first taking permission and also to switch off our phones in movie theatres. They have a series of ads like: Hum Aapke Hain Tring Tring and Ali Baba and Tring Tring. The ads are innovative and sure to make an impact. DNA (i.e., the newspaper Daily News and Analysis) states: “There’s no difference between our rich and poor. They both spit generously on the roads.” Superb. Simply Suberb.

Monday, March 06, 2006

Commenting is becoming such a jhamela

Some time back I commented on a couple of posts and got seriously embroiled in arguments on both sites. Both topics were super sensitive and highly emotional, but what really surprised me was that people with a high level of education (most are university students or have completed graduate level at least) could be so extremely backward in their thinking and so stuck in the conventional mind-set that is ingrained in their system.

The first post I commented on was discussing the pros and cons of allowing FDI in Retail in India. Now, to my mind, this is the most simple decision. As a retailer, you must move in tandem with your customers needs to be successful and as a customer, you decide on where to shop based on cost, convenience and quality of products. Both these are heading in the same direction---keeping the customer happy and the retailer profitable. Unfortunately, most people don't seem to think so and want FDI to not be permitted to 'protect' the small kirana store owner. The kirana store owner, who does not pay taxes, charges the maximum amount on the MRP, does not need this form of protection, instead will be do better with the backup of an organized supply chain. Most people did not agree with me and felt that the day Wal-Mart opens up shop in India will be the saddest day in Indian history. I was amazed and appalled at the ridiculousness of the sentiment.

The second argument I got involved in was on a Delhi-Mumbai comparison. I love the resilience of Bombayites (not Mumbaikars, and yes there is a difference between the two..........sorry I don't know Mumbaikars in the one year that we have been here and would like to stay away from now on anyways) that was displayed during the July 26 flood last year, their cheerful and friendly nature. But what I don't like and understand about the people of Bombay is how they can be so blind to a city that is crumbling around them. If they really love the city, then why aren't they interested in improving it, instead of always fighting with North Indians...esp. Delhi-ites, about how much better Bombay is? Bombay people love to bash Delhi,its people, its DTC buses, its eve teasers, but they are losing the race to be the better city, because Delhi is reinventing itself, as it has done so many times before. Bombay, on the other hand, is going to collapse, its just a question of when.

I'm have lived in both cities and have enjoyed the experience of it but disappointed with the mentality of the people of Bombay. And yes, I am eagerly waiting for Wal-Mart or Carrefour to open and when they do, I hope to be one of their first customers.