Supply Chain Connectivity and Food Distribution. Sanjeev Asthana
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1 Supply Chain Connectivity and Food Distribution Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009
2 Presentation Flow - Evolving Indian Economy - Changing Food Dynamics - New Growth Drivers - Supply Chain Challenge - Emerging Solutions & New Platforms 2
3 India is Growing! Source: Economist India will be the third largest economy by
4 Urban Population Increasing Urban population projected to cross 500 million by 2025 Cities are expanding 4
5 Food Consumption Increasing Food demand increasing Quality preference increasing 5
6 Retail Sales Growing Retail sales to cross US$ 550 billion by 2008 Total food sales to cross US$ 250 billion by
7 Growth Drivers Demographic advantage: Young population Increasing discretionary incomes Increasing retail space Credit availability 7
8 Challenges Inefficient Supply Chain Infrastructure Low Technology Penetration Food safety Unorganized sector Bureaucracy 8
9 Disjointed Food Supply Chain Farmer Farmer Village Village District District Commission Commission Commission Commission Agent Agent Agent Agent Wholesaler Wholesaler Sub Sub Wholesaler Wholesaler Retailer Retailer Consumer Consumer Farmer Low yield / non-standard quality Price de-linked from market Processor No control on quantity / quality of raw material Village Commission Agent Unscientific and unhygienic handling Poor market access Loss in trade passed onto farmer Distributor Lack of infrastructure leading to loss of quality Mandi / Local agents No infrastructure for handling / grading Price quality correlation not assured Transportation Unscientific method leading to loss of quality / damages Retailer Consumer Lack of infrastructure leading to loss of quality High prices Limited choice Wholesale mandi Inadequate infrastructure Rampant wastage Opportunistic profiteering Non value adding players 9
10 Poor Agri Infrastructure Poor infrastructure facilities for Storage Transportation Processing Packaging Distribution About 3,500 cold storages/warehouses Only 13m tonnes of storage capacity for production or 140 mn tonnes of Fruits/Vegetables 10
11 Supply Chain High Costs Inefficiencies in Distribution Lack of cold chain and warehouse structure Logistics costs in India are among the highest Fragmented retail structure Supply Led Growth World: 72% India: < 1% More than 5 million retail outlets selling food products Limited focus on food safety and hygiene Limited choice to the consumer Low investment in quality control, product innovation, private labeling and market intelligence 11
12 Low Farm Realization Eg. F&V Total Product Cost 100% Farmer 35% Farmer Level Consolidation 10% District level Consolidation 5% Commission Agent 10% wholesaler 10% Sub- Wholesaler 10% Retailer 20% Farm Realizations are low Supply Orientation and Poor Infrastructure, gutslot selling at harvest Efficient supply chain will increase income at farm and consumer level Retailer's Margin Distributor's Margin Sales Tax Discount / Scheme Transportation / Distribution Processor's margin Packing Material Excise duty Mfg Variable Cost / Processing Freight / Octoroi Skimmed Milk Branded Atta Powder + Ghee Branded Chicken Nuggets Jam Convenience Food (Misc Edible prep) Fruit Juice Sugar Confectionery Potato Chips Movement to stockist Mandi charges (Auction / Aadhat) Farmer Mass Products Value added food Source: Rabo Bank 12
13 Underdeveloped Processing Industry Country % Processed Malaysia 83% South Africa 80% Phillipines 78% Thailand 72% Brazil 70% USA 65% India 2-3 % Source : National Horticulture Board, India Fruits and vegetables 2-3% of produce is processed 8% - 37% lost in storage and transportation Inadequate storage and cold chain Inadequate processing and marketing infrastructure Grains 3% is lost in storage Opportunity Significant growth potential & a challenge 13
14 Opportunity for Development Managing Supply Chain from Farmer to Consumer Providing Market Access & Support to Agri-output Integrated Logistics Management Reduction in Product Loss/Wastage Disintermediation Branding, Private labelling, Retailing Value addition Processing & Packaging Exports Investment in Infrastructure, people Cost Reduction Improving Farmer realization Input support to Farmers Agri-Extension Timely Supply of Quality Inputs Relationship work with Farmers Quality output & productivity Information & Technology Forecasting Technology dissemination Traceability Harnessing untapped potential Agrifood market undergoing significant change 14
15 Emerging New Supply Chain New agriculture supply chain is emerging India removing nonvalue adding intermediaries Partnership with value adding intermediaries of the supply chain Technology transfer Streamline processes Maintain Quality 15
16 Value Adding Intermediaries Current Intermediaries Value Adding Intermediaries Provide material flow but no information flow to farmers Aggregation of volumes Use lack of market information for own benefit Can control supply & hence prices for own benefit Primitive level of sorting and grading Provide material flow & complete information flow to farmers Aggregation of volumes, handling & storage using best available technology Development of robust market intelligence systems transparent to farmer level Sorting/grading for domestic & export markets Capital infusion for processing & value addition 16
17 Private Sector Action Improving Infrastructure 17
18 Way Forward Private-Public-People Partnership can be growth engines for Agro Enterprise Development 18
19 Thank You! Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009
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