Supply Chain Connectivity and Food Distribution

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Supply Chain Connectivity and Food Distribution

  1. 1. Supply Chain Connectivity and Food Distribution Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009
  2. 2. Presentation Flow - Evolving Indian Economy - Changing Food Dynamics - New Growth Drivers - Supply Chain Challenge - Emerging Solutions & New Platforms Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 2
  3. 3. India is Growing! Source: Economist • India will be the third largest economy by 2040 Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 3
  4. 4. Urban Population Increasing • Urban population projected to cross 500 million by 2025 – Cities are expanding Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 4
  5. 5. Food Consumption Increasing • Food demand increasing – Quality preference increasing Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 5
  6. 6. Retail Sales Growing • Retail sales to cross US$ 550 billion by 2008 – Total food sales to cross US$ 250 billion by 2008 Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 6
  7. 7. Growth Drivers Demographic advantage: Young population Increasing discretionary incomes Increasing retail space Credit availability Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 7
  8. 8. Challenges • Inefficient Supply Chain • Infrastructure • Low Technology Penetration • Food safety • ‘Unorganized’ sector • Bureaucracy Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 8
  9. 9. Disjointed Food Supply Chain Village Village District District Sub Sub Farmer Farmer Commission Commission Wholesaler Commission Commission Wholesaler Wholesaler Retailer Consumer Retailer Consumer Agent Agent Wholesaler Agent Agent Farmer • Low yield / non-standard quality • Price de-linked from market Processor • No control on quantity / quality of raw material Village • Unscientific and unhygienic Commission handling • Lack of infrastructure leading Distributor to loss of quality Agent • Poor market access • Loss in trade passed onto farmer Mandi / Local • No infrastructure for handling / • Lack of infrastructure leading Retailer to loss of quality agents grading •Price quality correlation not assured Transportation Unscientific method leading to • High prices • Consumer • Limited choice loss of quality / damages Wholesale • Inadequate infrastructure mandi •Rampant wastage •Opportunistic profiteering Non value adding players Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 9
  10. 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 Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 10
  11. 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 Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 11
  12. 12. Low Farm Realization Eg. F&V • Farm Realizations are low Total Product Cost 100% Farm er 35% • Supply Orientation and Poor Infrastructure, Farm er Level Consolidation 10% District level Consolidation 5% gutslot selling at harvest Com m ission Agent 10% • Efficient supply chain will increase income at wholesaler 10% Sub- W holesaler 10% farm and consumer level Retailer 20% 2000 Retailer's Margin 1800 Distributor's Margin Sales Tax 1600 Discount / Scheme 1400 Transportation / Distribution 1200 Processor's margin 1000 Packing Material 800 Excise duty 600 Mfg Variable Cost / Processing 400 Freight / Octoroi Movement to stockist 200 Mandi charges (Auction / Aadhat) 0 Skimmed Milk Branded Atta Branded Jam Convenience Fruit Juice Sugar Potato Chips Farmer Powder + Ghee Chicken Food (Misc Confectionery Nuggets Edible prep) Mass Products Value added food Source: Rabo Bank Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 12
  13. 13. Underdeveloped Processing Industry • Fruits and vegetables Country % Processed – 2-3% of produce is processed Malaysia 83% – 8% - 37% lost in storage and South Africa 80% transportation Phillipines 78% Thailand 72% – Inadequate storage and cold Brazil 70% chain USA 65% – Inadequate processing and India 2-3 % marketing infrastructure Source : National Horticulture Board, India • Grains 3% is lost in storage Opportunity Significant growth potential & a challenge Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 13
  14. 14. Opportunity for Development Integrated Logistics Management Managing Supply Investment in Chain from Reduction in Product Infrastructure, Farmer to Loss/Wastage people Consumer Disintermediation Cost Reduction Branding, Private labelling, Providing Market Retailing Improving Access & Support Value addition – Processing & Farmer to Agri-output Packaging realization Exports Agri-Extension Input support to Quality Timely Supply of Quality Inputs Farmers output & Relationship work with Farmers productivity Forecasting Harnessing Information & untapped Technology dissemination Technology potential Traceability • Agrifood market undergoing significant change Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 14
  15. 15. Emerging New Supply Chain • New agriculture supply chain is emerging India removing non- value adding intermediaries • Partnership with value adding intermediaries of the supply chain – Technology transfer – Streamline processes – Maintain Quality Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 15
  16. 16. Value Adding Intermediaries Current Value Adding Intermediaries Intermediaries Provide material flow but no Provide material flow & complete information flow to farmers information flow to farmers Aggregation of volumes Aggregation of volumes, handling & storage using best available Use lack of market technology information for own benefit Development of robust market Can control supply & hence intelligence systems transparent to prices for own benefit farmer level Primitive level of sorting and Sorting/grading for domestic & grading export markets Capital infusion for processing & value addition Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 16
  17. 17. Private Sector Action Improving Infrastructure Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 17
  18. 18. Way Forward Private-Public-People Partnership can be growth engines for Agro Enterprise Development Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009 18
  19. 19. Thank You! Sanjeev Asthana Agro Enterprise Without Borders, Singapore, 2009

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