The India opportunity in Food and Agribusiness Final ... - Efresh India

The India opportunity in Food and Agribusiness 

Final Report 

prepared by 

Rabo India Finance Ltd 

(a 100% subsidiary of Rabobank International) 

March 2010 

The information contained in this publication has been compiled, from sources which Rabo India Finance Limited, its 

associates and other legal entities to which it belongs (Rabo) believes to be reliable, and Rabo does not guarantee its 

accuracy or completeness. This publication is for private circulation and for the exclusive and confidential use of 

addressee(s) only. Any other distribution, use or reproduction without Rabo’s prior consent is unauthorized and strictly 

prohibited. Rabo does not accept any liability whatsoever direct or indirect that may arise from the use of the information 

herein. Opinions expressed in this document are subject to change without notice. Rabo and its subsidiaries, associates, 

agents, assigns, related parties, directors or employees may from time to time have interests in the securities or companies 

mentioned in this document and / or investment banking or other professional relationship with such companies. 

Materials and information provided during this presentation may contain ‘forward‐looking statements’. These statements 

are based on current expectation, forecasts and assumptions that are subject to risks and uncertainties which would cause 

actual outcomes and results to differ materially from these statements. Rabo disclaims any intention or obligation to 

update or revise any forward‐looking statements whether as a result of new information, future events or otherwise.

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Executive summary 

The team from Rabo India undertook a detailed study for the Embassy of the Kingdom of the 

Netherlands (RNE) in select Food and Agribusiness (F&A) sectors in India. This was with the objective 

of strengthening the F&A corridor between India and the Netherlands by identifying mutually 

beneficial opportunities for industry players as well as other stakeholders in both countries. The four 

specific sectors of interest include Dairy and Dairy equipments, Fresh Produce Supply chain, 

Floriculture, and Bakery equipments. 

The summary of the findings and opportunities in various sectors are highlighted below. 

Dairy and Dairy equipments 

Milk production in India currently stands at 108.5 million tonnes and is growing at 4% per annum for 

the last one decade. India has the largest population of bovine animals in the world. The productivity 

of Indian cattle (944 kg/annum) is low as compared to that of the EU. This is mainly because of the 

poor feeding of milch animals at farm level. Also, the average size of herd in India is 3‐4 milch 

animals as compared to 70‐80 in Netherlands. Lack of transport infrastructure, cold chain facilities 

(bulk coolers, chilling centres) and refrigerated vehicles has restricted the reach of quality dairy 

products to larger towns. Pricing the milk and giving due weightage to fat, SNF and also to the 

bacteriological quality is essential for attaining good end product quality. Low productivity and 

fragmented dairy farms open up opportunity for setting up of integrated dairy farms. Players from 

the Netherlands can enter into a Joint Venture with an Indian company to improve farm 

management practices. 

India is one of the fastest growing markets for milk and milk products. The market size for milk and 

milk products (formal + informal sector) is INR 2000 bn (EUR 30.8 bn). The organized market is 

growing at nearly 10 percent in value terms annually. With increasing urbanization, demand for 

value‐added products is increasing. Some product segments like UHT milk, yoghurt etc are still a 

nascent category catering largely to the high income households. Product innovation and pricing 

holds the key in this market. 

There are very few brands in the Indian dairy sector with a pan‐India reach. There is immense scope 

for branded players, particular international brands, in the Indian market. Products of international 

brands have entered the Indian market either through importers or through grey market channels. 

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The India opportunity in select Food and Agribusiness sectors 2

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The high prices of these products restrict their consumption largely to high income households. 

Opportunities exist to join hands with a local manufacturer in production for making value‐added 

products. 

The increase in processing levels in the organized market from 20% (of total milk produced) to 30% 

in the next 5 years should lead to building up of new capacities. India has made considerable 

progress in the manufacture of dairy equipments with the emergence of several equipment 

manufacturers. Some of them have exclusive tie‐ups with foreign players for providing advanced 

dairy equipments. The industry is showing growth in certain categories such as bulk milk coolers, 

small homogenizes, milk pasteurizers, milk vending machine and liquid milk packaging system etc. 

There is ample scope for manufacturing equipments for basic products like paneer, khoa etc. Further 

value added products like ice cream, cheese, yoghurt, UHT milk plants (Tetrapak) require specific 

equipments and machineries for setting up of the plant. However, the entry of foreign player is 

dependent on the price competitiveness with the local manufacturers. A JV with an existing player is 

recommended for getting a foothold in this market. 

India is currently an insignificant player in the international market owing to poor quality of products 

as compared to Oceania, EU and USA. Also, there has been a policy pursued by the Government of 

India to ban exports of dairy products from time to time. There is huge demand for milk powder and 

butter oil in lean season. There exists an opportunity to export these products from the Netherlands, 

provided the price is competitive vis‐à‐vis countries such as New Zealand and Australia. 

Finally, the key to success of any joint venture in India lies in the ability to procure milk. It is 

therefore essential to have a local partner to enter India to ensure consistent supply of raw milk. 

Companies from the Netherlands could also invest in the supply chain infrastructure to ensure 

availability of high quality milk on a sustainable basis. 

Fresh produce supply chain 

India is the world’s second largest producer of fruits and vegetables. It is bestowed with favourable 

agro‐climatic conditions for growing a large variety of fruits and vegetables. India is the largest 

producer of several fruit crops such as mango, banana, sapota and acid lime. Among vegetables, 

India is a large producer of tomato, onion, brinjal, cabbage, cauliflower, okra and pea. Increasing 

income and the growth of organised food retail holds promise for the fresh produce industry in the 

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future. Nevertheless, despite a huge planted base for horticulture, India lags behind in several areas 

such as yields, pre and post harvest practices as well as cold chain infrastructure. 

There are clear opportunities for increasing farm productivity through developing high yielding 

varieties, replacement of old and uneconomical orchards, high density planting (HDP), protected 

cultivation and low cost green house technology, adoption of improved technologies in orchard 

management and training in good agriculture practices. Also, there are opportunities to develop 

processing varieties with high shelf life. India offers a seasonal window of opportunity for imports of 

fruits such as apples and pears into India. Separately, there exists a strong export potential for 

several fruits such as grapes, pomegranates and bananas. In fact, the export opportunity has 

increased the need for implementation of quality standards and cold chain. 

Players from the Netherlands can also collaborate/invest in the development of fresh produce retail 

chains in backend aggregation, cold chain logistics, demand forecasting, resource planning and 

advanced management systems. In fact, the required infrastructure in the fresh produce supply 

chain is estimated at EUR 1211 million. This covers terminal markets, integrated pack houses, cold 

storage/controlled atmosphere technology and installations, ripening chambers, refrigerated 

transport and multimodal logistics network. Also collaboration opportunities exist with various 

government institutions spanning the entire value chain in terms training, technology transfer and 

advisory opportunities. For instance, Research and Development assistance could be explored to 

State Agricultural Universities (SAUs) and other reputed institutions 

Floriculture 

Cut flowers and ornamental plants play an important role in the floriculture industry. The wide range 

of climatic conditions in India makes it a suitable destination for production of flowers throughout 

the year. The domestic flower production (loose, cut and dried) as well as consumption is increasing 

year on year. The area under cultivation of flowers is at 160,700 ha (2007‐08) and has grown at an 

average of close to eight percent per year over the last fourteen years. 

The Government of India has recently undertaken a lot of steps to encourage further growth in the 

floriculture sector. Apart from opening of flower auction centre and market facilitation centre, it has 

provided cold storage related infrastructure at key airports in India. While India has a negligible 

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share of global exports, there has been a shift towards growing cut flowers for exports. India’s 

exports in the floriculture sector are at EUR 56.7 million in 2008‐09. EU remains an important 

destination for India’s cut flowers which is evident from the fact that Europe together with Japan, 

accounts for 76% of the total Indian cut flower export realizations. Floriculture exports are likely to 

rise at a CAGR of 15% over the next 5 years. Trade liberalization has not only facilitated imports of 

latest technology, but also encouraged and enhanced import of internationally acclaimed planting 

material of different varieties. Along with the export industry, the demand in the domestic market is 

also enormous and holds promise for the future. The present market is estimated at EUR 154 million 

(2007‐08) and growing at 21 percent per year. 

There are many opportunities in floriculture sector in India where players in the Netherlands can 

collaborate besides fresh cut flower exports from India. For instance, there are significant 

opportunities in the production and marketing of dry flowers and the production of high‐value oil 

extracts and perfumes, dyes and other products, such as rose water etc. In fact, dry flowers already 

form a sizeable chunk of Indian floriculture exports. In addition, as the cost of production in India is 

comparatively lower than that in other developed countries, outsourcing flower production to India 

could be a good business model for Netherlands. There is also an opportunity for using India as a 

production base for cactus. There is also an opportunity to explore an association of Indian institutes 

with the universities in the Netherlands to cater to these needs for the industry in the areas of 

variety development, best practices for cultivation etc. Companies from the Netherlands can also 

explore providing end to end solutions to the floriculture players i.e. from selection of land, 

infrastructure development (green house structures etc), training, planting material, project 

management and customers. 

Bakery equipments 

The bakery market in India is estimated at more than EUR 3.2 billion (INR 210 billion). India is the 

second largest producer of biscuits after the U.S. The two major bakery industries, viz. bread and 

biscuit account for about 90 percent of the total bakery products. The estimated size of organised 

bread industry is about EUR 0.77 billion (INR 50 billion). In volume terms bread is projected to grow 

at 1.9 percent where as value added breads are expected to grow at 18‐20 percent. In biscuit 

segment, organized sector accounts for almost 50% of the production. The estimated size of 

organized biscuit industry is about EUR 1.1 billion (INR 69 billion). It is estimated that the biscuit 

market would grow at 8 percent per annum over the next five years. Other bakery products such as 

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breakfast cereals, cakes and pastries are growing at around 8‐11 percent annually. These products 

are largely limited to urban areas. 

With increasing number urbanisation and need for sheer convenience has resulted in Indian breads 

gaining market share. Consumers are upgrading from unpacked/artisanal cake to packed industrial 

alternatives. Increasing health awareness is giving a push to consumption of healthier options like 

brown bread, multigrain bread, whole wheat bread, multivitamin bread etc. Also, modern 

supermarkets are instrumental in bakery growth in India. Also, the organized food service sector in 

India is growing at 12‐15% annually. International chains such as Subway, Dominos, Pizza Hut are 

expanding their franchise to Tier‐II cities. The growth of fast food/café chains would result in 

increased consumption of baked products across the country. 

The Indian bakery equipments industry, estimated at EUR 23 million, can be divided into industrial 

line (required by bread and biscuit companies for mass production) and non‐industrial lines 

(required by individual bakeries). About 85% of the bakers use domestic made low‐end equipments. 

These equipments are of average quality and priced lower than imported equipments from 

developed countries. After sales service is one of the biggest hindrances in the success of imported 

machineries. 

Most of the foreign players prefer to use existing manufacturers or traders network as the cost of 

setting up own dealer network is high. In India, bakery equipments are largely imported from EU, 

South Africa, China and Taiwan. Shift from handmade to mechanization‐technology is yet to make a 

big impact in the bakery industry. Demand is rising for equipments that can produce convenient high 

quality bakery products. Consumers have started to appreciate quality. 

Organized players, modern retail and food service chains would be key targets for equipment 

manufacturer. Considering the growth rate of various segments of bakery industry it is estimated 

that besides the current market there is a potential new market for equipment capacity equivalent 

to 1.2 million tonnes of baked product over the next 5 years. In order to penetrate the India market, 

it is extremely important for equipment suppliers to provide excellent after sales service. In fact, the 

initial cost of machine is not such a big factor as is the after sales service. Since having their own set 

up in India may require a certain scale, foreign companies should have JVs with some of the Indian 

players with proper focus on the after sales service. 

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Chapter 1 

Background 

The Embassy of the Kingdom of the Netherlands (RNE) has sought assistance from Rabo India 

Finance Ltd (RIF), a 100% subsidiary of Rabobank International, to provide strategic advice pertaining 

to the food and agribusiness landscape in India and to identify mutually beneficial opportunities for 

companies in India as well as the Netherlands. The four specific sectors of interest include Fresh 

Produce Supply chain, Floriculture, Dairy and Dairy equipments as well as Bakery equipments. 

This study entails a detailed supply chain analysis of the selected sectors in India, with focus on the 

gaps and opportunities in the sector. The sector studies have been conducted through secondary 

data research, meetings and discussions with stakeholders, some of whom include food processing 

companies, technology providers / equipment suppliers, industry associations, importers/exporters 

as well as various government bodies. 

A focused workshop was also organized by RNE in the Netherlands to share the findings of the draft 

study and validate the opportunities identified in the sectors. Leading industry players and 

companies/organizations with interests in the above sectors were invited for this workshop. Based 

on the feedback received at the workshop, this final report has been prepared, which documents the 

findings of the supply chain analysis and the identified opportunities across the four sectors of study. 

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Chapter 2 

Dairy and Dairy Equipments 

2.1 Introduction 

Milk production in India currently stands at 108.5 million tonnes and is growing at 3.5% per annum 

over the last eight years. India ranks second in terms of milk production after EU‐ 27 and accounts 

for c. 16% of global production. The average size of herd in India is 2‐3 milch animals compared to 

70‐80 in Netherlands. For a subsistence farmer, milch animals have multipurpose utility: draught 

animal, fuel provider (dried manure) etc. 

Exhibit 2.1 Milk Production in India (million tonnes) 

Source: National Dairy Development Board, India 

Since India is a tropical country, climate has an effect on the production pattern of milk in India. 

There are two seasons for milk production viz. the lean (from April to September) and flush season 

(from October to March). Milk production is higher in flush season and lower (~60% of flush season) 

in lean season. The market for milk and milk products are still largely dominated by the informal 

sector. Most of the milk produced in India is still retained by the producers. 

Exhibit 2.2 : Milk Processing in India (2009‐10) 

Degree of Processing Type % milk handled 

Raw Retention by rural consumers / sale to rural non‐producers 41 

Sold as loose milk in urban areas 17 

Processed (formal) Packed liquid milk 15 

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Degree of Processing Type % milk handled 

Processed (informal) 

Value‐added milk products 5 

Value‐added milk products 

22 

(mostly traditional Indian milk products) 

Total 100 

Source: Rabobank Analysis 

2.2 Milk Production 

Three tier system of dairy/Amul 1 Model 

India has a unique pattern of milk production and collection – the three tier system/Amul model 

followed by the dairy cooperatives. The Dairy Cooperatives have been organised into a three‐tier 

structure with the Dairy Cooperative Societies (DCS) at the village level coming under a Milk Union or 

District Union at the district level and a Federation of member Unions at the state level. The 13.41 

million farmer members of the dairy cooperative societies at the village level are a part of 128,799 

villages Dairy Cooperative Societies (DCS) also known as Primary Milk Producer Societies (about 130 

farmers per DCS) which are connected to 180 district milk cooperatives (Milk Union) and 17 State 

Federations. DCS handles about 27 million kg of milk per day. Presently the co‐operatives handle c. 

10% of the total milk produced in the country. The cooperatives form part of a national milk grid that 

links milk producers throughout India with consumers in more than 800 towns and cities and bridges 

seasonal and regional variations in the availability of milk. 

The activities of the DCS include: 

‣ Milk collection, testing quality of raw milk and fat and solid non fat (SNF) content determination 

‣ Sale of cattle feed 

‣ Provide micro‐level inputs such as Artificial Insemination (AI) service and Veterinary First Aid 

(VFA) to the members’ animals. 

‣ The DCS also markets nutritionally balanced compounded cattle feed produced by the cattle 

feed plant owned and operated by the District Union as well as fodder seeds. 

In general the Union carries out four important functions: 

‣ Milk procurement 

1 Amul is the largest co‐operative movement in India with 2.8 million milk producers organized in 13,328 co‐operative societies in 2008‐ 

2009. Amul follows a business model, which aims at providing 'value for money' products to its consumers, while protecting the interests 

of the milk‐producing farmers who are its suppliers as well as its owners. 

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‣ Milk processing and marketing 

‣ Providing technical inputs and extension services for enhancing milk production and productivity 

‣ Strengthening the milk cooperative movement 

The Federations are responsible for: 

‣ Evolving and implementing policies on cooperative marketing of member Unions’ milk and milk 

products 

‣ Deciding the products‐price mix 

‣ Managing centralized input services (artificial insemination, breeding) on behalf of the Union 

Milk procurement by private players 

The three tier system followed by the cooperatives is quite different from the milk procurement 

structure followed by the private players. The private dairies have a loose arrangement for 

procurement of milk wherein the milk is procured from the agents/contractors who in turn procure 

milk from the producers. Each agent typically would procure from 20‐25 producers. Some milk is also 

procured from the DCS of the co‐operative structure. In northern India, the use of 

agents/contractors is more prevalent than in other parts of India largely as the cooperative system is 

not that strong in this region. The agents are responsible for guaranteeing the quality of milk given 

to the private dairies. The private dairies handle c.10% of the total milk produced in the country. 

2.3 Market Potential 

India is one of the fastest growing markets for milk and milk products. The market size for milk and 

milk products (formal + informal sector) is INR 2000 bn (EUR 30.8 bn). The organized market is 

growing at nearly 10 percent in value terms annually. The demand for value added milk products viz. 

cheese, dahi (Indian yoghurt); probiotic drinks etc. is increasing at a double digit rate. 

At present India seems to be largely self sufficient in its requirement for milk and milk products. 

However, given that demand in organized dairy segment is growing faster than growth in milk 

production, there could be issues with respect to self sufficiency in the medium to long term. 

Focused efforts would be required on two fronts viz. increasing farm size (currently the average size 

of animal per producer is 2‐3) and increasing productivity of milch animals so as to catch up with the 

increasing demand of milk and milk products. 

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Liquid milk 

The packed liquid milk constitutes the largest segment in dairy, followed by ghee 2 in value terms. 

Indian consumers prefer fresh milk which is sold in pouches with a shelf life close to two days. Safety 

and quality concerns have prompted urban consumers to shift from loose liquid milk to pasteurized 

packaged milk. Dairy co‐operatives have a major presence in this segment in their respective state of 

operation e.g. ‘Amul’ in Gujarat, ‘Verka’ in Punjab, ‘Nandini’ in Karnataka, ‘Aavin’ in Tamilnadu, 

‘Saras’ in Rajasthan. Private players like Hatsun Agro, Creamline Dairy are also having a sizeable 

market share in liquid milk. Some of the domestic corporates such as Reliance, DSCL and CavinKare 

have also started their milk operations recently. 

Exhibit 2.3 : Organized market size and growth rates for various dairy products (2008‐09) 

Organized market 

value (EUR Mn) 

Growth rate 

(%) 

Liquid Milk 5,000 20 

Butter 200 8 

Ice‐cream 246 20 

Cheese (incl. cheese spread) 85 25 

Ghee (Anhydrous Milk Fat) 538 8‐10 

Dahi (Yoghurt) 100 20 

Paneer (Indian soft cheese) 38 10‐12 

Flavoured Milk 92 20 

Dairy whitener /Milk powder /UHT /sweets etc 577 10‐15 

Source : Rabobank estimates 

Butter 

This is used mainly for traditional food preparations. Amul is the market leader in this segment with 

a market share of c.80%. Growth in food services sector is key to increasing demand for this product. 

Other strong regional players in the market include Mother Dairy, Parag Dairy (Gowardhan), Verka, 

Vijaya etc. 

Ice‐cream 

This is one of the fastest growing segments in dairy with a CAGR of c. 20% in the last five years. 

Around 70% of the total ice‐cream sold in India is through organized format and the rest is sold 

through unorganised formats. GCMMF (Amul) is the market leader in ice cream with 25% of market 

share followed by Kwality Walls (HUL) and Vadilal at 15% and 10% respectively. Other players 

2 clarified butter 

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manufacturing ice‐cream include Mother Dairy and Hatsun Dairy, Dinshaw etc. There are many small 

players manufacturing ice‐cream in India catering mainly to the needs of the local market. Product 

innovation and pricing holds the key in this market. Basic flavors like vanilla, butterscotch and 

chocolate sell the most. Cold chain distribution along with product innovation is key to future 

growth of the ice‐cream market. Ice cream consumption is cyclical in nature and peaks around 

summer season. 

Cheese 

Cheese is the fastest growing market among milk products. Traditionally India has been a paneer 

(soft cheese) consuming market which is dominated by unorganised players. Rise in food service 

outlets (e.g. Pizza Hut, Domino’s etc.) across the country and changing food habits has triggered the 

increase in demand for this product. The various varieties of cheese available in this segment include 

cheddar, mozzarella, gouda, piccolo and processed cheese. Different variants of cheese spread 

(estimated market size EUR 16 mn) like plain, garlic, pepper etc. are also available in the market. 

Processed cheese has around 70% market share of the total cheese sold in the country. GCMMF 

(‘Amul’) is the market leader in this segment with c. 70% of market share. Bongrain (from France) is 

also present in this sector through their Indian subsidiary Dabon International Pvt. Ltd. It is selling 

basic and premium cheese variants of cheese and cheese spreads under their international brand 

Milkana ‐ though their presence is currently restricted to metropolitan cities. 

Ghee 

Ghee is the largest consumed item among milk and milk products after liquid milk. Ghee has been 

traditionally used for cooking purposes in Indian households. Traditional Indian sweets like Peda, 

Gulabjamun etc. are made using ghee as a cooking medium. ‘Amul’ and ‘Sagar’ are two well known 

brands (both from GCMMF) in this category with pan‐Indian footprints. Other strong regional brands 

include ‘Saras’, ‘Verka’, ‘Nandini’, and ‘Madhusudhan’ etc. 

Curd (‘dahi’) 

Curd (Indian yoghurt) is one of the fastest growing milk product segments in India. It is a traditional 

home made product but with increasing urbanization, demand for packaged curd is increasing. In 

most parts of India the local name for curd is ‘dahi’. This product is available in two forms viz. set 

dahi in plastic cups and stirred dahi in plastic pouches. In North India, mostly set dahi is consumed 

while in South India stirred dahi is a bigger market. Karnataka Dairy Co‐operative (brand ‘Nandini’) is 

the market leader in pouch dahi selling close to 100000 litres of pouch curd daily. Amul is the leader 

in set curd segment with pan‐India presence. Mother Dairy and private players like Nestle, Britannia 

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and regional players like Parag (‘Gowardhan’) are aggressively marketing their products in the 

market. 

Paneer 

Paneer (Indian soft cheese) is a traditional product consumed largely in northern and western parts 

of India. This product is very similar to cottage cheese and is manufactured using acid coagulant 

(lemon juice). In the past, demand for this product was catered mostly by the unorganised sector. 

However, since 2000, many organized players like GCMMF, Mother Dairy and Punjab MilkFed have 

started focusing on this product. The market share of GCMMF (brand ‘Amul’) is close to 50% while 

Mother Dairy and MilkFed (brand ‘Verka’) have 20% share each. Recently, Reliance Industries, India’s 

largest private sector company, has also entered this category. 

Flavoured Milk 

Flavored milk has the fastest growing market among various milk products. This product is mainly 

consumed as a beverage and competes with other beverages including the carbonated ones. The 

product is consumed more in the summer. Flavored milk is mostly sold in sterilized glass bottles. 

Other forms of packaging include polythene pouches and tetrapak and tin cans. GCMMF (brand 

‘Amul’) is the market leader in this category with close to 75% market share. Other brands include 

Mother Dairy (7%), Verka, Nandini, Vijaya, Saras etc 

UHT milk 

At present, UHT milk is a nascent category catering largely to the high income households. It is 

growing at a robust growth rate of 25% per annum. It is mainly promoted on the platform of safety, 

health and convenience. At present, UHT milk directly competes with loose / fresh pouch milk which 

is an extremely price sensitive category. 

Khoa 

Khoa is a traditional Indian product made by heat desiccation of milk. In ancient times the pricing of 

milk was done based on the quantity of khoa produced from milk. An estimated 7% of the total milk 

produced in the country goes for preparation of khoa, which forms a base for many traditional 

Indian sweets such as Gulabjamun, peda, kalakand etc. Currently there are no organized players 

manufacturing khoa due to lack of appropriate technologies for manufacturing at a continuous level. 

Probiotic products 

With health consciousness gaining ground among consumers, the demand for probiotic products is 

increasing. For example, GCMMF has launched a range of probiotic products (‘Amul Prolife’). The 

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acceptability of probiotic product is well supported by the fact that fermented and cultured dairy 

products are traditionally consumed in India. However, the challenge for probiotic products lies in 

distribution as the product carries live organisms that have to be preserved in specific numbers till 

final consumption. Yakult (from Japan) and Danone (from France) have joined hands to market 

probiotic fermented milk drinks in India. 

There is also a growing demand for dairy products as ingredients for pharmaceutical and allied 

industries. Indigenous milk products like shrikhand, gulab jamun, rassogulla, paneer, peda etc have a 

market worth INR 5 billion (EUR 77 mn) in North America, Canada, Europe and Middle East. These 

indigenous products offer scope for intervention of right technology and packing for longer shelf life. 

2.4 Export market 

India has been self sufficient in milk production and consumption. The exports of milk and milk 

products from India form less than 1% of the total international trade. Also, exports account for less 

than 1% of the total milk produced in India. The export market used to be mostly concentrated in 

Asia and more to neighbouring countries and Middle East primarily due to low cost of end products. 

Concentrated milk products (skim milk powder) form bulk of exports from India (78%). 

India has failed to become a major player in the international market owing to poor quality products 

as compared to Oceania, EU and USA. Also, lately there has been a decline in export competitiveness 

owing to higher farm gate prices (especially against New Zealand and Australia). Moreover, the 

increasing demand of milk and milk products in India has resulted in increased domestic prices of 

SMP and butter. However, India is surrounded by countries/regions which are gross milk deficient 

viz. Middle East, China, South Asia, South East Asia etc. There is still some scope for exports of value 

added milk products viz. skim milk powder, whole milk powder, butter etc. in these regions. 

In recent years there has been a policy pursued by the Government of India to ban exports of skim 

milk powder and whole milk powder. This was intended to discourage exports of milk powder so as 

to reduce domestic inflationary pressures. However, export of milk by‐products like casein, whey 

protein, lactose etc. were not banned during this period, thereby offering a small window of 

opportunity. 

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2.5 Challenges in dairy sector 

India has the largest population of bovine animals in the world. India has 57% of world buffalo 

population and 16% of world cattle population. The productivity of Indian cattle (980 kg/annum) is 

low as compared to that of European Countries and USA (approx. 8000 kg/annum). This is mainly 

because of the poor feeding of milch naimals at farm level. Cattle feed and concentrates are rarely 

fed to animals. It is green fodder, dry fodder and left over of household foods that is given to the 

animals. Also, the logistics cost of handling milk is high owing to fragmented farm size. The increase 

in average size of herd and productivity would help in reducing logistic costs and provide good 

quality raw milk on a consistent basis to the dairy plants. 

Cattle rearing and breeding techniques 

The main technical constraints to increasing milk yields are the inability of dairy farmers to feed 

cattle adequately throughout the year coupled with poor quality of dairy animals. Artificial 

Insemination services for breeding better cattle breed also has a limited reach with current coverage 

of bovines at only 34%. Moreover milk producers in India do not follow good hygienic practices while 

milking. Milch animals are milked using hands in more than 95% of cases instead of a milking 

machine. This result in poor quality of raw milk received at the dairy plant. 

Fragmented farm size 

The average size of milch animals per producer in India is 2‐3 as compared to 35 for EU 15. Handling 

and managing logistics of fragmented farms is quite costly and complex. Due to tropical climate in 

India, the raw milk quality is also not so good. Moreover due to the bottlenecks in infrastructure; 

milk collection is undertaken twice a day. This makes it difficult to manage the entire back end of the 

supply chain. Milk is transported both in chilled and raw form to the dairy plant. 

Poor state of infrastructure 

Poor roads and inefficient transport infrastructure has led to an inefficient procurement system. 

Moreover, the present distribution network has its limitation both in terms of reach and capacity. 

Lack of transport infrastructure, cold chain facilities (bulk coolers, chilling centres) and refrigerated 

vehicles have restricted the reach of quality dairy products to larger towns. The percentage of milk 

handled by the organized sector can be improved further if these bottle necks are resolved. 

However, dairy companies are reluctant to make upfront investments in infrastructure owing to 

concerns on return on investments. 

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Adulteration of milk 

At many places milk is subjected to adulteration before it reaches the dairy. Though the figures are 

not too high (

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2.6 Legal and Taxation Issues 

There are no excise duties on any of the dairy products manufactured in India. There are state‐level 

taxes for inter‐state movement of milk and milk products which are levied only on the organized 

players. This creates a non‐level playing field vis‐a‐vis the unorganized players, who in turn can price 

their products lower since there is no outflow on account of such levies. There is high level of 

taxation on dairy equipment and machinery with the exception of a few products which are exempt. 

This is primarily done by the government to encourage the domestic equipment manufacturing 

industry. 

2.7 Dairy Equipment Sector 

Of late, India has made considerable progress in the manufacture of dairy equipments with the 

emergence of several euipment manufacturers. Some of them have exclusive tie‐ups with foreign 

equipment players for providing advanced dairy equipment for the Indian dairy industry. The growth 

of the dairy equipment sector has picked up mainly because of growth in the organized dairy sector 

over the last decade. The industry is showing growth in certain categories such as road tankers, 

storage tanks, bulk milk coolers, small homogenizes, milk pasteurizers, milk vending machine and 

liquid milk packaging system etc. Equipments for packaging of butter, cheese, paneer and other 

traditional products needs focused attention for tapping small and medium scale operations. 

Milk Collection and logistics (upto milk plant) 

Milking machines 

A large percentage of dairy farmers still do manual milking with hands. Machine milking is slowly 

picking up due to some inherent advantages over manual milking. Machine milking scores over 

manual miking as it reduces cost of labour and ensures complete milking of cattle. Many domestic 

companies as well as a few MNC players like Delaval, Westfalia operate in this space. The MNC 

players offer better quality products as compared to domestic products, albeit at a premium pricing. 

Automatic Milk Collection Unit (AMCU) 

AMCU is a combination of software and applications and allied components such as PC, UPS system, 

printer, and milk tester automation unit. AMCU is used for collecting milk, capturing the data 

(quantity, fat%, SNF% and other additional information per transaction), whenever a farmer delivers 

the raw milk at the village pooling point (VPP). AMCU helps in making the overall transaction process 

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more transparent and trustworthy as it reduces human errors, transaction time and wastage as 

compared to the traditional manual way of collection, recording and billing. Imported products 

would not have a major technological advantage, given that they would be significantly costlier. A 

tie‐up with a local manufacturer can be the best option for a player from the Netherlands. 

Milk testing equipments 

Milk analyzer is used to measure % fat content in the milk at village pooling point level. The 

electronic milkotester which has been developed by Indian Dairy Equipment Company Ltd. is widely 

used. The lactometer is used for solid non fat content testing in the milk. There are many companies 

in India which are manufacturing milk analyzer instruments e.g. milkotester, milkoscan etc. There 

are also a few companies which sell these products under a technical collaboration with a foreign 

company, but the market for such products is negligible. There is limited scope for foreign players in 

this segment. However a tie‐up with a local manufacturer might work. 

Weighing scales 

There are no inherent advantages in this segment for any foreign player over indigenously made 

weighing macines. Local companies manufacturing weighing scales are fairly accurate and rigid to 

Indian conditions. There is no technological advantage attached ‐ hence limited scope for players 

from the Netherlands. 

Milk transportation vehicles/milk cans 

Milk is transported in milk cans of 20 or 40 litre capacity from farm to Bulk cooling point. These are 

made of aluminum or stainless steel. There are many private players manufacturing cans in India. 

The market leader is Khambete Kothari Cans and Allied Products Pvt. Ltd (KKCAP), the largest 

manufacturer of aluminium alloy milk cans in India. There are a number of small private players 

selling aluminium, plastic and stainless steel (SS) cans. No foreign player is present in this business. 

Milk tankers / Bulk Milk coolers 

Milk is transported to the dairy plant either in the form of raw milk (using cans) or raw chilled milk 

(using milk tankers). Also processed milk is transported using milk tankers. The milk tankers used in 

India are all insulated ones. Refrigerated tankers are still not used in India. This is because the time 

of transit generally varies from 1 hr to 2 hr in case of raw milk and the cost attached with 

refrigeration does not make a business case to move raw milk in refrigerated tankers. These milk 

tankers are made of stainless steel mainly and are manufactured by local fabricators in India. 

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Bulk milk coolers are used in the supply chain mainly if the distance between Village Pooling Point 

(VPP) and MCC is very large as transporting cans over large distance under ambient temperature 

would lead to deterioration or spoilage of milk. Bulk milk coolers used in India vary from 1 kl to 5 kl 

capacity. Both local and foreign manufacturers are present in the market for bulk milk coolers. The 

local manufacturers dominate bulk of the market (around 90%). The difference in price between 

local and foreign players is the main reason for higher market share of local manufacturers. The 

market for bulk milk is expected to grow at the rate of 25% every year for the next five years. This is 

also facilitated by the initiatives taken by dairy co‐operatives of several states like Gujarat, Punjab, 

Karnataka, Tamil Nadu, Rajasthan etc. to install bulk milk coolers at strategic locations. 

Entry of foreign player is dependent on the price competitiveness with the local manufacturers. 

Option of setting up own plant or a JV with an existing player would help in getting a foothold in this 

market. 

Processing equipments 

India has made considerable progress in the manufacturing of dairy equipments in last decade. The 

increase in processing levels in the organized sector from 20% currently to 30% in the next 5 years 

should lead to building up of new capacities. There is ample scope for manufacturing equipments for 

basic products like ghee, paneer, indigenous sweets (khoa, peda) etc. Further value added products 

like ice cream, cheese, powder, yoghurt, UHT milk plants require specific equipments and 

machineries for setting up of the plant. 

Also, the dairy equipment sector in India is highly protected with customs duty of 7.5% along with 

counter veiling duty and SAD (Special Additional Duty) on almost all dairy equipments (other than 

milk clarifiers). Clarifiers are exempted from import duty with an intention to boost clean milk 

production in the country. The fresh packed liquid milk requires basic processing and packing 

technology at plant level. Cost of the equipments and after sales maintenance service will remain 

key drivers for future growth. 

The range of equipments presently manufactured by the indigenous manufacturers include stainless 

steel dairy equipments, evaporators, milk refrigerators and storage tanks, centrifuges, clarifiers, 

homogenisers, spray dryers and heat exchangers (tubular and plate type) etc. In recent years many 

dairy plants have been commissioned by NDDB and the majority of equipments have been supplied 

by indigenous manufacturers. Advanced equipment like spray dryers, plate type heat exchanger and 

other core equipments require advanced technology to manufacture a good quality product 

bacteriologically. 

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Technology innovations 

The processing technology for manufacture of yoghurt and traditional Indian sweets plant 

equipment is deficient. The high speed machines for ice‐cream manufacturing are also not presently 

manufactured in India. The modernization of the manufacturing process of traditional dairy products 

is long overdue. However, there is no need to reinvent the wheel because some of the food 

processing methods available in the developed nations can be usefully adapted to mass produce 

traditional products. Some process modifications may, however, become necessary. 

The production of traditional products through modern technology can ensure utilizing larger 

quantities of milk during the flush season, thus helping in stabilizing farmer prices. The technology of 

recombining milk constituents can also help in making these products available in the lean season 

and in far‐off places. Shrikhand 3 is being manufactured in the winter for consumption in the summer 

months, reducing the pressure on limited milk supplies during the lean period. The advent of 

convenience foods and their increased acceptability will further support the modernization in this 

sector. 

While some of the basic products like khoa 4 based sweets (burfi, kalakand, and peda etc.) have huge 

volume sales in Indian market, the presence of loose products at cheaper price limits the 

opportunity for development of high technology products. Khoa based sweets are available in Indian 

streets where local halwais (sweet‐mart shop) make it an open kadhaai (kettle), employ little or 

negligible processing cost except heating and labour. Continuous khoa making machine has been 

developed in India and some dairy plants have started using the same. However, a huge potential 

exists in this segment since there is a lot of adulteration of this product to reduce the price. 

Export Potential in dairy equipments 

While most of the equipment manufacturing companies in developed countries focus on the needs 

of large dairy units, Indian companies are targeting the small and midsize operations in the US, 

Canada and other countries. Indian companies export equipments and accessories like cream 

separators and milk cans and also work on turnkey projects. They are specifically targeting small 

farmers and dairy units in the US, Europe and also the neighboring countries in South Asia. Indian 

companies are also exploring opportunities in Africa and the Middle East. India’s dairy equipment 

exports are estimated at around INR 1 billion (EUR 14.3 million). 

3 

Indian sweet dish made of strained yogurt 

4 

is a milk food, made of either dried whole milk or milk thickened by heating in an open iron pan 

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Overall the dairy equipment segment is expected to have a modest growth owing to growing 

organized dairy sector (25‐30%). Cost effective equipment manufacturers are expected to dominate 

the market. 

The following table provides data on the players in the dairy equipment market: 

Exhibit 2.4 : Dairy equipment players in India 

Name of the equipment 

Pasteurizers 

Seperators 

Bactofuge 

Price 

(EUR) 

Manufacturers 

5Kl 30,500 GEA Ecoflex, 

10kl 46,000 Tetrapak, IDMC 

20kl 77,000 

30kl 92,000 

20kl 1,84,000 GEA Westfalia, 

30kl 2,60,000 Tetrapak 

20kl 2,22,000 GEA Westfalia, 

30kl 3,14000 Tetrapak 

Pneumatic Valves 600 Gea Tuchenhagen, 

Alfa Laval and IDMC 

Comments 

These are the three reputed 

manufacturers 

These are two reputed 

manufacturers 

Not all plants use bactofuge 

Powder Plant equipments 

Evaporator calaindrias (30kl) 26,000 GEA Niro, 

Concentrate preheater (30kl) 26,000 Anhydro+Alfa Laval 

Drying chamber(30 tones/day) 2,30000 

Vibro fluidizer 15,000 

Atomizer assembly 77,000 

Powder plant 10 tons per day 7,70,000 GEA Niro, 

Powder plant 30 tons per day 15,40,000 Anhydro+Alfa Laval 

Casein Plant equipments 

30 tons per day ring dryer 4,60,000 

Lactose plant equipments 

Whey powder plant equipments 

GEA Barr Rosin, 

Anhydro 

10 tons per day 7,70,000 GEA Niro, 

30 tons per day 7,70,000 Anhydro+Alfa Laval 

10 tons per day 9,20,000 GEA Niro, 

30 tons per day 18,40,000 Anhydro+Alfa Laval 

These are the individual costs of 

equipments used in powder plant 

Total cost i.e. evaporation section 

+drying section 

The equipments include 

disintegrator, hammer mill, 

clasifier and huge tube type shape 

ring dryer 

Cost same as that of powder plant 

plus addition cost of crystalization 

tanks (each cost 16,000 USD) 

The cost is 20% more than the 

powder plant since SS316 is used 

instead of SS304 

Dairy Farm equipments 

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Name of the equipment 

Price Manufacturers Comments 

(EUR) 

Bulk coolers (1000 lt) 8,5000 IDMC Foreign players are practically 

Bulk coolers (2000 lt) 13,000 

absent in this segment 

Source : Rabobank research 

Bulk coolers (5000 ls) 15,400 

GEA, Tetrapak, Alfa‐Laval and IDMC (Indian Dairy Machinery Corporation) are the prominent dairy 

equipment players in India. GEA, Tetrapak and Alfa‐Laval are foreign players and IDMC is an Indian 

player. IDMC is the largest equipment manufacturer in the country and has tie‐ups with various 

MNCs including GEA, Alfa‐Laval and other equipment manufacturers to provide engineering 

solutions to the dairy plants. 

2.8 Opportunities in India for dairy players from the Netherlands 

India is one of the largest producers of milk. It is also, one of the cheapest farm gate producers of 

milk. The demand for value added milk products viz. UHT, dairy whitener, flavoured milk, dahi, 

cheese etc. is growing at a double digit rate, with most dairy companies expanding their business in 

these segments. 

The opportunity areas for dairy players in the Netherlands are as follows 

Farm related 

Given the low productivity and fragmented dairy farms opportunities exist for setting up of 

integrated large scale dairy farms to eliminate farm level inefficiencies. There is huge possibility of 

increasing the productivity of milch animals and increasing the size of herd thereby making dairying 

less fragmented. Presently there are few large scale dairy farms (i.e. more than 20 animals). Players 

from the Netherlands can enter into a Joint Venture with an Indian company to improve farm 

management practices. Many dairy players are investing in setting up cold chain infrastructure for 

procurement of raw milk. Bulk milk coolers are being set up to enhance the quality of raw milk and 

to reduce the logistics cost in transportation of milk to the processing plants. 

Procurement 

The key to success of any joint venture in India lies in the ability to procure milk, which is a complex 

process. Previously the dairy sector was highly protected and procurement areas were demarcated. 

It has increasingly become liberalized with more involvement of private players. This has led to more 

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competition for procurement. There is no foreign player other than Nestle who has set up its own 

back‐end for procurement. Setting up own procurement network is not only costly but also time 

consuming for any foreign player entering India. It is therefore essential to have a local partner to 

enter India to ensure consistent supply of raw milk to the dairy plant. 

There are several dairies in India having well‐build procurement network but have a weak brand. 

Most of these companies act as co‐packers to big dairy giants viz. Amul, Mother Dairy. Players from 

the Netherlands can tie up with such companies either by entering into a Joint Venture with them 

or by acquiring strategic stake in such companies. The Dutch players can add a lot of value in terms 

of quality and safety of the product to the urban customers catered by these retail companies. 

The pricing of milk in India is based on fat percentage in milk. Farm gate price of milk is lower in India 

as compared to most of the European countries. Fat price per kg is more than twice that of SNF in 

India. This clearly presents an opportunity for companies in the Netherlands to explore export 

opportunities by setting up procurement / processing base in India for feeding its existing market 

worldwide. 

Milk production in India is cyclical in nature. The production of milk in the lean season/summer 

months (April‐Sept) is 65% of flush season/winter months (Oct‐March). This creates a mismatch in 

supply and demand during lean and flush months. There is huge demand for milk powder and butter 

oil in the summer months mainly for reconstitution purposes. There exists an opportunity to export 

these products from the Netherlands mainly during the lean season. 

Infrastructure 

There are a number of infrastructure related bottle necks in both the back end (procurement) and 

front end (marketing) of the supply chain. Investments in back end are not undertaken by many 

dairies partly due to long gestation period /uncertainty for returns. This is further compounded by a 

lack of availability of BMCs (Bulk Milk Chillers), milking machines as well as know‐how on 

management of large dairy farms. Huge investments are required to set up the infrastructure for 

improving the back end network. However Amul and Nestle are two dairy companies in India which 

have well‐established back end network. As part of the JV mentioned in farm related /procurement 

related (above) players from the Netherlands could also invest in the supply chain infrastructure 

to ensure availability of high quality milk on a sustainable basis. 

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Value‐added products and brand development 

There are very few brands in the Indian dairy sector with a pan‐India reach. Nestle’s product range 

comprises baby foods, dairy whitener, curd, yoghurt, UHT milk (white milk and flavored milk). Amul 

has the entire range of milk and milk products. There is immense scope for branded players, 

particular international brands, in the Indian market. Products of international brands like Kraft, 

Friesland‐Campina, Land O’Lakes and others have entered the Indian market either through 

importers or through grey market channels. Some of the recent initiatives by foreign players in India 

include Yakult and Danone for fermented milk products, Danone for nutritional milk drinks, Bongrain 

through Dabon for cheese products etc 

The high prices of these products restrict their consumption largely to high income households. For 

example, Indian cheese from Amul sells at INR 350 (approx. EUR 5.4) per kg as compared to 

imported cheese which has a price point of INR 1200 (EUR 18.5). Opportunities exist for European 

companies to join hands with a local manufacturer in production for making value‐added products 

customised for the Indian domestic market at an appropriate price band. 

Dairy Equipments 

Common dairy equipments used are plate heat exchangers, homogenizers, cream separators, 

packaging machines, storage tanks etc. All these equipments are widely available in India and are the 

mainstay of any dairy company dealing in selling fresh milk. For large scale plants (they usually prefer 

a mix of domestic and foreign equipments), foreign players might be a preferred partner. 

Some of the domestic companies in India are already exporting their products (e.g. milking 

equipments, cans, milk testing instruments, bulk milk coolers etc.) to African and neighboring 

countries in South Asia. This segment is growing at double digit rate. This can be an opportunity 

worth exploring for players in the Netherlands. 

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Chapter 3 

Fresh produce supply chain 

3.1 Production and demand for fresh fruits & vegetables (FF&V) 

India is bestowed with varied agro‐climatic conditions in different regions, which is highly favourable 

for growing a large number of horticultural crops such as fruits and vegetables. India is the world’s 

second largest producer of fruits and vegetables. As per the latest available data (2007‐08), the 

production of fruits and vegetables has been estimated at 63.5 million tonnes and 126 million 

tonnes respectively. India’s share in worldwide fruit and vegetable production is about 10 per cent 

and 13 per cent respectively. 

Fruits 

A wide range of fruits are produced in India. 

Tropical and sub‐tropical Mango, banana, citrus, pineapple, papaya, guava, chiku, jackfruit, 

litchi and grape 

Temperate 

Apple, pear, peach, plum, apricot, almond and walnut 

Arid zone 

Aonla, ber, pomegranate, annona and fig 

India is the largest producer of mango, banana, chiku and acid lime. About 39 per cent of world’s 

mango and 23 per cent of world’s banana is produced in the country. 

Exhibit 3.1 ‐ Fruit production in India (million tonnes) 

Source: NHB 

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Exhibit 3.2 ‐ Fruit production in India (2007‐08) 

Fruits 

Area 

(‘000 ha) 

Production 

(‘000 tons) 

Share in total production 

Banana 647 23205 37% 

Mango 2205 13792 22% 

Citrus 843 7574 12% 

Papaya 80 2686 4% 

Apple 264 2001 3% 

Guava 178 1975 3% 

Grapes 64 1677 3% 

Pineapple 80 1216 2% 

Sapota 150 1238 2% 

Litichi 69 418 1% 

Pomegranate 122 858 1% 

Others 1071 6862 11% 

Total 5775 63503 

Source: National Horticulture Board (NHB) 

Vegetables 

India is next only to China in area and production of vegetables and occupies prime position in the 

production of cauliflower, second in onion and third in cabbage in the world. Important vegetable 

crops grown in the country are tomato, onion, brinjal, cabbage, cauliflower, okra and peas. 

Exhibit 3.3 – Vegetable production in India (millon tonnes) 

Source : NHB 

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Exhibit 3.4 ‐ Vegetable production in India (2007‐08) 

Vegetables 

Area 

(‘000 ha) 

Production 

(‘000 tons) 

Share in total 

production 

Potato 1786 34463 27% 

Onion 805 12157 10% 

Tomato 572 10261 8% 

Brinjal 566 9596 8% 

Tapioca 270 9054 7% 

Cabbage 265 5888 5% 

Cauliflower 321 5797 5% 

Okra 409 4193 3% 

Peas 314 2560 2% 

Sweet Potato 126 1146 1% 

Others 2370 30774 24% 

Total 7803 125887 

Source : NHB 

As per studies conducted in 2007 by ICRIER 5 on the Indian horticulture sector, several Indian fruit 

and vegetables are fairly competitive in the global market. These include fruits such as mango, 

banana, grapes, papaya and guava, and vegetables such as onion, potatoes, peas and tomatoes. 

Demand 

A major shift in consumption patterns of fresh and processed fruits and vegetables is expected in the 

coming decade. Demographic profiles of the consumers have been changing and their level of 

disposable income and standard of living is on the rise. As per NCAER (National Council of Applied 

Economic Research) surveys, about one third of the rural households could move to the middle 

income group and above by 2010, leading to more demand for fruits and vegetables. As against the 

recommended dose of per capita consumption of 120 gm of fruits/day and 280 gm of 

vegetables/day, the present consumption is 97 gm and 195 gm respectively. The emerging food 

retail sector, where F&V retail would account for c. 1% (1 million tonnes), has brought in a lot of 

opportunities in the domestic sector. Market liberalization and increasing consumer demand has 

also offered attractive opportunities for agricultural exporters from India in selected products. 

5 Indian Council for Research on International Economic Relations (www.icrier.org) 

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Regional distribution of fresh produce production 

Indian fruit and vegetable production is distributed over diverse agro climatic conditions across 

different states (See Exhibit 3.5). 

Exhibit 3.5(a) : Main fruit producing states (2007‐08) 

Exhibit 3.5(b) : Main vegetable producing states (2007‐08) 

Source : National Horticulture Board (NHB) 

Seasonality of production 

Production of fruits and vegetables in diverse agro climatic conditions across India leads to 

seasonality in terms of availability. For instance, cauliflower and green peas are highly seasonal while 

cabbage and okra are fairly seasonal. Potato and onions are among the few vegetables which are 

available right through the year for consumers. In case of fruits, there is extreme seasonality in case 

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of mango and apple. There are large variations in prices due to seasonality. In India the seasonality 

effects are further accentuated as storage facilities are both limited and expensive. 

Exhibit 3.6 : Main fruit seasons in India 

Mango 

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 

Papaya 

Custard Apple 

Pineapple 

Banana 

Guava 

Tomato 

Sapota 

Grapes 

Litchi 

Orange 

Sweet Lime 

Grapefruit 

Apple 

Cherry 

Plum 

Pear 

Apricot 

Peach 

Source : Industry sources, Rabobank research 

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Intervention opportunities in production 

In India, the productivity of fruits has remained low as compared to world average in case of apple, 

stone fruits and oranges. Some of the measures for increasing productivity would include 

introduction of high yielding strains/varieties of temperate fruit crops as well as replacement of old 

and uneconomical orchards. Further, adoption of improved technologies in orchard management, 

which include quality planting material, balanced nutrients and timely protection against major 

insect‐pests and diseases and economic use of inputs like fertilizers, growth regulator and pesticides, 

is highly recommended. 

Exhibit 3.7 : Productivity comparisons 

Product India (tonnes/ha) World average 

(tonnes/ha) 

Apple 7.65 13 

Plums 1.27 4 

Peaches/Nectarines 2 11 

Apricot 0.9 7 

Cherries 2 5 

Papaya 8.75 N.A 

Orange 9 17 

Onion 11 17 

Source : FAO 

High density planting (HDP) is one of the important methods to achieve high productivity per unit 

area both in short duration and perennial horticultural crops. Further, micro irrigation and 

fertigation practices could enhance productivity and ensure judicious use of water and fertilizers. 

There is also a dearth of standardized rootstocks of perennial fruit trees. There is a clear opportunity 

for research institutes from the Netherlands to work with private corporates and research bodies in 

India in developing new varieties of fruit with high shelf life, amenability for processing, suitability 

for exports etc. There is need to standardize techniques for rapid propagation, evolve agrotechniques, 

efficient water management, integrated plant nutrient management systems and 

integrated disease and pest management for all commercial perennial crops. 

Also, in vegetables there are limited varieties suited for protected cultivation, value addition, etc. 

Production technologies need to be developed for organic cultivation based on scientific 

experimentation involving different disciplines to derive complete packages. There is a need for 

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development of post harvest handling protocols for various fruits and vegetables for exports, for 

storage and processing systems, for product diversification and value addition. 

Protected cultivation in greenhouses harnesses the optimum natural resources through artificial 

means for increasing crop productivity. Of the 100 large green houses, 12 green houses are near 

New Delhi (covering 50 hectares), where the climate is extreme during winter and summer. There 

are nearly 38 green houses in Bangalore, covering 200 ha. The state of Maharashtra alone has 99 

greenhouses, of which 15 large greenhouses cover 115 ha and 84 small greenhouses cover 35 ha. 

Low cost greenhouse technology has been developed for high quality flower production in hilly 

states of Jammu & Kashmir, Himachal Pradesh, Uttaranchal and North Eastern states. In fact, there 

are c. 8000 green houses of 100 sq m and close to 1500 green houses of 500 sq m in these states. 

There are 362 low cost green houses established in Jammu & Kashmir for promotion of protected 

cultivation of off season vegetables and flowers. 

The constraint in adoption of greenhouses is mainly the high investment required on equipments. 

Since capital cost is high (EUR 10.7 per sq m for hi‐tech green house) due to high interest rate and 

consumers are reluctant to pay a higher price for the end product, cultivation is viable only for a few 

crops. However, considering the advantages of greenhouses, there is ample scope for increasing the 

area under protected cultivation, especially for high value flowers and off‐season /exotic vegetables. 

To keep pace with improved production and productivity, different machines have to be developed 

for effective cultivation, intercultural operations, harvesting, grading, packaging and value‐addition. 

For instance, development of mango harvesters, kinnow 6 clippers, potato diggers, coconut peelers, 

etc. have improved the efficiency of the growers. Development of machines are also required for 

different specialized uses like cool sterilization (irradiation) for sprouting in potato and onion, 

dehydration of different produce, vapour heat treatment (VHT) in major mango growing belts, 

packaging of coconut water, banana fig and chip making machine etc. 

3.2 Import and export trade in fruits and vegetables 

Import trends in fresh produce 

Imports of fruit and vegetables which could be of interest to players from the Netherlands have 

been provided in the table below. Increasing import opportunities are predominantly in the 

6 

Orange variety grown in parts of North India 

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temperate fruits such as Apples and Pears. There is clear seasonal window available for apple 

imports from of December to July. 

Exhibit 3.8 : Imports of leading items of fresh produce into India 

Product 2007‐2008 2008‐09 

Volume tonnes 

Apple 58401 71204 

Pears and quinces 8183 9577 

Brussels’s sprout 3188 NA 

Grapes 2723 2967 

Kiwi 1400 1889 

Melon (other than water melon) 628 787 

Plums and sloes 580 698 

Pomegranates 838 1803 

Figs 213 79 

Source : Ministry of Commerce, Government of India 

Trade in imported apples 

Imports in apples have been growing steadily since 1999 (after the trade liberalization). As per 

industry sources, apple imports were close to 80,000 tonnes in 2008‐09. Apple imports have a 

seasonality window of December to July. Imports are mainly from United States (variety mainly 

Washington Red Delicious) followed by China (Fuji variety) and other countries such as Chile, New 

Zealand and South Africa (varieties such as Royal Galla, Granny Smith, Golden Delicious, Pacific 

Series and Red Chief). Also, among the Australian apples, Tasmanian apple (Hi Early and Top Early) is 

in high demand. 

Exhibit 3.9: Retail prices of import apples 

Apple variety Origin EUR /kg 

Green Apples (Granny Smith) US, Australia 1.8 to 3 

Fuji China 1.1 to 1.5 

Red Delicious (Washington) United States 1.8 to 2.2 

Royal Galla New Zealand 1.5 to 1.8 

Golden Delicious, Red Chief, Pacific series Chile, South Africa, US NA 

Source: Rabobank analysis 

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Based on the information gathered through market visits and anecdotal information, the breakup of 

various costs and margins on imported US apples is shown in Exhibit 3.10 

Exhibit 3.10 : Marketing cost and margins for imported US apples, 2007 

Description 

INR per box of 20 kg 

Import unit price, CIF* 550 

Expenses incurred by importer on: 500 

Tariff 300 

Clearing 30 

Freight 70 

Commission of agent 100 

Importer's margin** 200 

Realization at wholesale market 1250 

Expenses of trader 50 

Carriage/Handling 5 

Cold Storage (15 days on an average) 25 

Market fee/Commission 20 

Wholesale trader's margin*** 200 

Sub‐wholesaler's purchase price 1500 

Sub‐wholesaler's margin*** 200 

Retailer's purchase price 1700 

Retailer's expenses 100 

Carriage/Handling 20 

Transportation 50 

Wastages 30 

Retail margins*** 600 

Consumer price** 2400 

*Source: DGCIS 

**Observed market price of US apple in Delhi, 2007 

***Calculations based on field visit information, import unit values, and retail prices 

The total margin in the supply chain amounts to about 50 percent of the end consumer price. In fact, 

the 50 percent customs duty on imports amounts to only 11.5 per cent in the final consumer price. 

At the same time, the 50 percent trader’s margin in end consumer price represents a tariff 

equivalent of about 200 percent on C.I.F. import unit value The value addition to the apples in terms 

of waxing, grading, better packaging, traceability (and ocean shipping) is already included in the 

import unit values. The apples are merely transported and distributed in India. In this context, with 

limited value addition, a trader’s margin is extremely healthy and may reflect imperfections in the 

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market. The transit time to India from various origins of imports and the CIF prices/20 kg box is as 

provided below. 

Exhibit 3.11 : Transit time for import apples 

Country 

Australia 

USA 

Chile 

Transit Time 

24 days 

30 days 

50 days 


Exhibit 3.12 : CIF prices of import apples 

Country 

CIF price/20 kg box 

US, Australia EUR 11‐15 

Chile EUR 9.5 – 13.5 

China EUR 9‐11.5 


Local levies and taxes such as VAT, Central Sales Tax in the respective states are applicable. In 

addition to quarantine restrictions, the imported produce are required to mainly comply with PFA 

(Prevention of Food Adulteration Act) which stipulates Maximum residue levels (MRL’s) for 

particular pesticide residues. In case the relevant pesticide is absent, Codex Standard is followed. 

Opportunities to import to India 

Imports of fruits have shown a consistently increasing trend in the last eight years. For instance, 

apple imports have been increasing at a CAGR 7 of 50% for the last three years. Pears and stone fruits 

trade has also seen rapid growth in the last few years. Other fruits with import prospects are grapes 

and citrus. The demand for imported fresh fruit and vegetables is growing rapidly amongst urban 

consumers, despite the fact that these products are two to three times more expensive than their 

domestic counterparts. These consumers are also seeking a variety of vegetables such as iceberg 

lettuce and brussel’s sprouts which has also seen high growth in imports, albeit on a small base. 

Though the high perishability of the product is the limiting factor for regular import supplies, there is 

certainly a huge potential for products which are amenable to longer shelf life through proper cold 

7 Compounded Annual Growth Rate 

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chain management. This would present an opportunity for players in the Netherlands to adopt a 

production tie‐up route for building the market in India. 

Export trends in fresh produce 

The major fruits exported in terms of quantity are grapes, mangoes, apples, pomegranates, bananas 

and oranges. In value terms grapes and mangoes are the main fruits exported from India. Among 

fresh vegetables, onion and potato are the most important ones both in terms of volume and value. 

Tomatoes and pumpkins are other major fresh vegetables exported to the world. However, their 

volumes are quite low. The main export destinations for fresh fruit and vegetables are neighbouring 

countries such as Bangladesh, Nepal, the Middle East as well as South East Asia (Malaysia, 

Singapore). Brinjal is exported mainly to European markets such as UK, Netherlands and France. 

Exhibit 3.13 : Exports of fresh produce from India 

Product 

Volume 

(tonnes) 

2007‐08 

Value 

(EUR Mn) 

2007‐08 

Volume 

(tonnes) 

2008‐09 

Value 

(EUR Mn) 

2008‐09 

Onions 1,008,606 188 1,670,186 291 

Grapes 96,723 58 118,132 59 

Pumpkins 45,829 21 71,283 33 

Mangoes 54,351 23 83,703 27 

Tomatoes 134,845 28 12,467 20 

Potatoes 78,451 8 184,960 18 

Pomegranates 35,175 17 34,811 18 

Bananas 16,663 5 30,401 9 

Apples 32,655 6 44,552 8 

Green chillies 26,895 8 30,198 8 

Lemons 16,223 3 29,493 6 

Oranges 29,261 5 25,330 4 

Papaya 10,880 2 13,834 3 

Source: APEDA, 2009 

Opportunities for exports of grapes, pomegranates, mangoes, bananas have increased the need for 

implementation of scientific production and post harvest practices at the farm level. There is a huge 

opportunity for players in the Netherlands to help Indian growers/exporters focus on improved 

quality standards across the entire chain and cater to the import requirements in developed regions 

such as the EU, US, Japan etc. 

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3.3 Fresh fruit and vegetable supply chain in India 

Multi‐layered marketing chain for FF&V 

A typical supply chain for fruits and vegetables is multilayered with multiple intermediaries (range 

from 4‐7). Fresh produce in India is marketed mostly through state government regulated 

Agricultural Produce Marketing Committee (APMC) markets. APMC regulations require that the 

purchasing of fresh produce takes place in a notified market and with registered traders 

(commission agents). There are two charges levied on the marketed produce. First is the commission 

paid to the commission agent and second is the market tax which goes to the market committee as a 

payment towards using the premises and other capital works related to market development. 

Exhibit 3.14: Fresh produce supply chain 

Hand Cart Vendor 

Farmer 

Village 

Commission 

Agent 

Market 

Commission 

Agent 

Wholesaler 

Sub- 

Wholesaler 

Roadside 

Vendor 

Consumer 

Trader / 

Transporter 

Retailer 

Supermarket 

Contract 

Cultivation 

Intermediate 

Processor 

Final 

Processor 

Rabobank research 


F&V Marketing Company 

The local traders are the traders close to the farmers who procure the produce from the farms and 

bring it to the market. Wholesalers at the APMC market sell the produce to the semi‐wholesalers / 

retailers. These retailers include roadside and neighbourhood stalls and kiosks and doorstep delivery 

by hand carts. The last link in the chain is the consumer. Marketing through traditional means is 

characterized by little attention to grading, sorting and storage, weak institutions and poor handling 

during loading, unloading and transport. The high percent of post‐harvest damage can largely be 

explained by such poor handling of the produce. The fruit and vegetable supply chain differs 

according to the type of the crop, nature of market which is being serviced and the proximity of 

production to the market. The high profit margin of intermediaries is quite disproportionate to their 

services as seen in Exhibit 3.15 below. The mark‐ups by each participant in the chain cause the 

farmer to receive as little as 25‐35% of the price paid by the consumer. 

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Exhibit 3.15: Price build up for tomatoes (INR/kg) 


Contract production in case of fruit and vegetables amounts to less than 1% of total production in 

India. Amendment of the APMC act by several states has facilitated contract farming. There are 

many success stories on Contract Farming which has helped growers increase their realizations. 

Fresh produce retailing in India 

Indian market for Fresh Fruit and Vegetables (F&V) is estimated at EUR 25 bn (INR 1.6 trillion). 

Organised retailing of Fresh F&V is estimated at c. 1% of total production and is growing at the rate 

of 30‐40%. With the modernisation of the Indian food retail and the entry of large organised players 

(national and international), huge investments are being made in developing the back‐end. For 

instance, large conglomerates such as Reliance, AV Birla and Bharti Group are increasingly working 

with farmers directly and offering them an assured market, at profitable rates. Some are going 

further by helping farmers to adopt better farming practices, and providing financial assistance to 

help in improving production, productivity and quality. 

Exhibit 3.16 : Initiatives taken in back‐end development 

Player 

Initiative 

Reliance Retail Reliance Retail has taken over a large number of farms in Maharashtra and Karnataka; has its own 

cargo carriers for moving produce from the farm to food processing plants or retail outlets: has 

invested in tracking systems to monitor the movement of goods and plan inventories; and has 

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Player 

Initiative 

entered into tie‐ups with food processing plants to ensure quantity and quality of output. Reliance 

Retail is also evaluating setting up terminal markets across India. These would enable large backend 

operations and create captive agricultural bases, either for their own retail outlets or for 

supplying to others. 

Bharti Wal‐Mart Bharti Wal‐Mart Private Limited, is a joint venture between Bharti Enterprises and Wal‐Mart Stores 

Private Ltd. Inc. for wholesale cash‐and‐carry and back‐end supply chain management operations in India. This 

would serve kirana stores, fruit and vegetable resellers, restaurants and other business owners. It 

also will serve other retailers such as Bharti Retail, which is setting up a chain of stores in India that 

are 100 percent owned and operated by Bharti Enterprises. Also, Bharti Retail has taken over a 

number of farms in various parts of the country where it will undertake contract farming. Wal‐Mart 

is expected to build up the back‐end extensively and bring in state‐of‐the‐art technology to 

strengthen the back end. 

Choupal Fresh ITC’s Choupal Fresh has set up a complete cold chain to ensure the availability of fresh products in 

the market, besides direct linkages with the farmers for sourcing farm fresh produce. 

Aadhar (Future Aadhar has formed tie‐ups with farmers for fresh produce supplies. The farmers come to its 

Group) distribution centers, do sorting and grading of fruits and vegetables. It is then transported to 

Aadhar outlets. 

DSCL (Business DSCL is sourcing and supplying fresh fruits and vegetables to various organized retail chains 

house) through its established back‐end. 

Khet‐Se This is a joint‐venture between Total Produce, Ireland, one of Europe 's largest fresh produce 

Agriproduce providers and Tata Chemicals, India’s leading chemicals and crop‐nutrition Company. Khet‐Se is a B‐ 

India (P) Ltd to‐B cash and carry business which has state‐of‐the‐art facilities for fresh fruit and vegetables 

sourcing, packaging and distribution across India Khet‐Se has plans to set up cash‐and‐carry 

distribution centres across India. The company will buy fresh fruits and vegetables directly from 

farmers at market price and distribute through the distribution centres to the wholesalers. 

Mahindra MSSL is supplying fresh produce to global retailers like Carrefour, Tesco, Albert Heijn, and 

ShubhLabh Sainsburry's; and Indian retailers like Reliance. It is now exploring growth opportunities in the fresh 

Services Ltd produce supply chain space as well as joint ventures with major international supply‐chain 

(MSSL) companies. This would help offer a bouquet of supply‐chain services and develop capabilities for 

strong supply chain, logistics support and the infrastructure to back a successful retail venture. 

MMSL has tied up with farmers for procurement and some farmer groups have formed grower 

societies to sell to MSSL. 

Source: Industry sources 

The business models of these private players are based on investing in the complete chain from the 

input level to the front end retail. The main components of this model are: 

(i) rural facility (collection center / rural retail / agri service centre) 

(ii) distribution centre, and 

(iii) retail end. 

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The rural facility is essentially set up in semi‐urban and rural areas which has multiple functions: (i) 

provide inputs and farm support services including seeds, fertilizers, plant protection chemicals, 

extension support and other services such as lab testing, water testing, etc; (ii) retailing of fast 

movable consumer goods (FMCGs), food items and consumer durables to the rural consumers; and 

(iii) procurement centres for fruits and vegetables. The rural hubs of different retail firms have 

different names such as Choupal Sagar (ITC) or Aadhar (Future Group). 

The distribution centre or collection centre is usually located in an urban area close to the stores. 

FFVs procured from the various rural hubs are collected at the distribution centre where the 

produce is graded, sorted, packed and sent to the retail outlets. As the retail chains are relatively 

new, the produce is procured from multiple sources including direct procurement from farmers, 

regional APMC markets and other preferred suppliers. Over time, as the supermarkets develop their 

backend linkages, the tendency will be to source directly from farmers or preferred suppliers 

because it is difficult to have control over the quality of produce procured from APMC markets. 

Finally, the last step in the chain is the retail store in urban areas. This has been set up by players 

such as Godrej (Nature’s Basket), Reliance Industries (Reliance Fresh), ITC (Choupal Fresh). Target 

customers in certain cases would also be wholesalers and/or direct consumers. 

Organized wholesaling in Fresh produce 

Other cases of investments in the back end infrastructure have been in “back end aggregation”, 

specializing and investing to be able to source and supply quality produce to supermarkets, retailers 

and institutions. Here the business model is focused on procuring, storing and distribution. 

Adani Agri Fresh Ltd (AAFL) 

AAFL has set up state‐of‐the‐art infrastructure for grading, sorting and controlled atmosphere 

storage of apples (18000 tonnes) in three locations in Himachal Pradesh, one of the main apple 

producing regions. They procure directly from farmers and store the fruit to capture the off‐season 

demand. 

Metro Cash & Carry India Pvt. Ltd 

Their operations include wholesaling of all consumer items including food products. Fresh fruit and 

vegetables is also a part of their operations. Currently, they have stores in Bangalore and Hyderabad 

and plan to open stores in other metropolitan areas including Kolkata. 

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Export chains 

A seasonal window from April‐May has provided huge opportunity for export of grapes from India. 

Compliance to GLOBALGAP had been a critical success factor in this trade. Major initiatives on this 

front are MSSL (Mahindra Shubhlabh Services Limited), Namdhari’s Fresh, Field Fresh, Freshtrop and 

Euro Fruits. The firms have developed tight quality control chains to meet the export requirements. 

As the trade is highly knowledge intensive, these players had been able to build up a loyal captive 

farmer base consistently supplying high quality produce to them. These players have also invested in 

state‐of‐the‐art cold chain infrastructure, packing and grading houses, cold stores and refrigerated 

trucks, along with highly skilled post‐harvest manpower to meet the quality parameters of the 

importers. 

Value addition in FF&V chain 

Primary processing in FF&V 

Grading of horticultural commodities is an important aspect particularly from marketing point of 

view to get better returns. However, it is largely not being followed at the farm end in India due to 

the lack of awareness and knowledge. Manual grading to a certain extent is usually undertaken by 

sub‐wholesaler or retailers. 

Some states Governments have taken steps in setting up grading and sorting facilities. For example, 

the Government of Andhra Pradesh is providing financial support for establishment of packing 

houses and packing materials. In Himachal Pradesh and Jammu and Kashmir, grading/packing 

centres particularly for apple have been established. There are 11 grading and packing centres in 

Himachal Pradesh with an installed capacity of 37,500 tonnes. However, most of these packing 

houses need to be upgraded technologically. Maharashtra, a leading state in production of 

important fruits like mango, banana, grapes, orange, pomegranate, onion etc, has set up various 

post‐harvest infrastructure facilities such as The Post‐harvest Technology Institute in 1993, a precooling‐cum‐cold 

storage facility along with a packing house with mechanized grading/packing 

facility for the promotion of export of fresh mangoes and vegetables. Similarly, in Punjab, PAGREXCO 

(Punjab Agri Export Corporation Ltd.) has set up five mechanical sorting, grading, waxing centres 

with a capacity of 2 tonnes/hour for kinnow. 

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APEDA 8 , New Delhi, has also recognized 106 pack houses in different states which have facilities of 

international standards for grading and packing of fruits and vegetable particularly for exports. After 

due verification recognition certificates have been issued by APEDA to these pack houses. 

Exhibit 3.17 : State‐wise number of pack houses recognised by APEDA 

Maharashtra 97 

Andhra Pradesh 5 

Uttar Pradesh 2 

Karnataka 1 

Gujarat 1 

Total 106 

Source: Planning commission 

Terminal markets 

Due to reforms in the APMC (Agricultural Produce Marketing Act) act, many state governments are 

in the process of developing terminal markets in collaboration with private players. These markets 

have been planned in Mumbai, Nasik, Nagpur, Chandigarh, Rai (Haryana), Patna, Bhopal and Kolkata. 

They are based on the “hub and spoke” model, with a number of collection centers where the 

farmer’s produce will be collected, cleaned and graded according to its quality. They would also have 

electronic auction halls, display areas, viewing galleries, transportation corridors, cold storage units, 

and loading and unloading areas. The farmers would have a choice for sale of their produce: through 

electronic auctioning or direct sale to exporters, processors or retail chain network. Produce from 

the terminal market is either sold to retailers/consumers or processors, or assembled for despatch 

to distant markets and export. Facilities for forward trading in specific commodities also take place. 

Many private players have expressed interest for developing terminal markets. 

Cold Chain in FF&V 

As per the latest data available with the Government of India, there were 5,101 cold stores in India 

with a total capacity of 21.7 million MT. Out of the total cold storage capacity in the country, nearly 

66 per cent (14.3 million MT) is confined to two states i.e. Uttar Pradesh and West Bengal. 

Development in cold chain infrastructure during the last decade has been driven primarily by 

proteins such as meat, fish and dairy products. However, it is still largely inadequate to meet the 

current requirements. 

8 Agriculture and Processed Food Products Export Development Authority 

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Exhibit 3.18: Summary of number of cold storage in India – State wise (Dec 2006) 

States No. of Units Capacity (‘000 MT) Share of total 

capacity (%) 

Average 

capacity (MT) 

Uttar Pradesh 1567 8932 41.0 5700 

West Bengal 434 5340 24.5 12304 

Gujarat 374 974 4.4 2604 

Bihar 238 910 4.1 3825 

Andhra Pradesh 276 821 3.7 2974 

Madhya Pradesh 179 762 3.5 4261 

Maharashtra 437 511 2.3 1169 

Rajasthan 106 312 1.4 2944 

Karnataka 138 253 1.1 1835 

Other States 1352 2878 16.0 2802 

TOTAL 5101 21693 100.0 4253 

Source: DMI 

The private sector is the largest segment accounting for over 90 percent of total number of cold 

storages and c. 95 percent of the total cold storage capacity in India. There are 4,609 private cold 

storages with a total capacity of c. 20 million MT. 

In India, more than 80% of the capacities are utilized for potatoes only and 17% under multi 

commodity. UP, West Bengal and Punjab are the top ranking states in terms of cold storage capacity 

for potatoes. Even with such large tonnages for potato, these are still estimated to be inadequate 

and cater to only 40‐42 per cent of the total cold storage requirements for potato. 

Multi‐purpose cold storages account for ~26% of the total number of cold storages. These are also 

used for potato storage besides chilies, dry fruits, fruits, spices, vegetables etc. Karnataka has the 

largest number of multi‐purpose cold storages followed by Andhra Pradesh and Maharashtra. Cold 

storages storing fruits and vegetables account for less than 1 percent of the total cold storage 

capacity. 

Most of the cold stores are single chambered, and the technology in use has also been largely based 

on old technology resulting in high energy wastages and escalation in cost of storage. The 

government had been supporting the construction of these large single chambered cold storages 

through various schemes including those through the National Horticulture Board (NHB). 

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Controlled Atmosphere (CA) storage capacity in India currently is about c. 25000‐30000 tonnes and 

is limited due to prohibitive set up cost (EUR 1200/MT). The technology which has been put to use in 

the last two years by few private players has enabled apple farmers to reduce the wastage as well as 

distress selling. There has been a clear increase in realisation, thanks to CA storage and marketing 

the apples during off season times. 

There is also limited use and availability of ripening chambers to ensure uniform ripening in fruits 

particularly banana, mango etc. At present, ripening of certain fruits like banana, papaya and chikoo 

are largely through traditional methods with use of calcium carbide. This results in degradation in 

quality of fruits besides creating health hazards for the consumers. Further, the FF&V industry also 

uses blankets and packaged pellet sachets of an ethylene adsorbent to control ripening. 

Agri logistics infrastructure and refrigerated transport 

The diverse agro climatic production regions and ensuing seasonality, coupled with limited storage 

facilities leads to high variation in prices and significant value loss in the Indian fruit and vegetable 

sector. A multi‐modal logistics network between various production centres and consumption 

centres that reduces transportation time and temperature abuse is totally absent in India. 

The refrigerated container market in India has been dominated by a handful of medium sized 

companies and is at a nascent stage of development. It is estimated that only about 2 million tonnes 

fresh fruits and vegetables goes through the reefer mode. This leads to huge quality and value loss. 

Private players have been reluctant to invest in refrigerated transportation infrastructure due to a 

number of reasons 

 

 

 

 

A refrigerated truck costs double that of a normal truck for a 10 tonne capacity depending on 

level of technology (USD 0.03‐0.05 mn Vs USD 0.01‐0.02 mn per truck). 

Also the costs of operating the refrigeration system is high given that it has to be diesel based in 

absence of charging points. Further the lower speeds for travel and numerous stoppages add to 

the cost. 

There is an increase in non‐productive movement due to absence of return perishable cargo. 

Due to high operating cost (nearly two and half times that of dry product transportation) 

transporters are unable to tap the F&V market that is price sensitive. 

There is low awareness among the farmers/consumers regarding the benefit of transporting 

perishable through reefer containers. 

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Reefer trucks are not in use throughout the year due to seasonal nature of perishable 

produce/products. 

3.4 Institutional framework governing the horticulture in India 

Foreign Direct Investment 

FDI has been permitted up to 100 percent under the automatic route for floriculture, horticulture, 

cultivation of vegetables and mushrooms under controlled conditions and services related to agro 

and allied sectors, animal husbandry, pisciculture and aquaculture etc. Also, FDI up to 100 percent 

under automatic route is allowed for infrastructure facilities like cold storage, transportation, 

warehousing and also for infrastructure development in processing /storage activities. Ever since the 

government permitted 100 percent FDI in cash and carry formats, the sector has attracted 

investments from foreign players such as Metro and Wal‐Mart. 

Department of Agriculture & Co‐operation, Ministry of Agriculture (DAC) 

This department is the nodal agency for the development of the horticulture sector in India. The 

horticulture division under this department implements its programmes through the state 

departments of horticulture. At present, horticulture crop programmes forms around 30 per cent of 

the total outlay for agriculture development of DAC. A Central Institute of Horticulture has been set 

up at Mediziphema, Nagaland for effective dissemination of technologies and capacity building. 

Indirect organizational support for horticulture development is also being provided by two agencies 

in the Ministry of Agriculture, viz., National Cooperative Development Corporation (NCDC) and 

National Agricultural Cooperative Marketing Federation (NAFED) 

National Horticulture mission (NHM) 

NHM was launched in 2005‐06 by the Government of India to promote integrated development in 

horticulture, to help in coordinating, stimulating and sustaining the production and processing of 

fruits and vegetables and to establish a sound infrastructure in the field of production, processing 

and marketing with a focus on post‐harvest management to reduce losses. The NHM provides 

support for the setting up of different types of markets viz. wholesale markets, rural markets, direct 

markets. The setting up of the terminal markets has also been conceptualised under NHM. 

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National Horticulture Board (NHB) 

NHB promotes integrated development in horticulture, assists in development of post harvest 

management infrastructure, promotes production and processing of fruits and vegetables, 

strengthening of market information systems and assists in R&D programs in cultivation and 

processing. NHB’s financial schemes are directed towards commercial horticulture and infrastructure 

related to post harvest techniques. 

Technology Mission for Integrated Development of Horticulture in North East Region & Himalayan 

States (TMNE) 

The Technology Mission was launched during the financial year 2001‐02 to achieve overall 

development of horticulture in various states to harness the potential in the above region. 

Agri‐Export Zones (AEZs) 

APEDA 9 under the Ministry of Commerce is implementing the scheme of Agri Export Zones with a 

view to promote agricultural exports from the country and ensure remunerative returns to the 

farming community in a sustained manner. AEZs are intended to take full advantage of a particular 

produce/ product located in a contiguous area for the purpose of developing and sourcing the raw 

materials, their processing/ packaging, leading finally to exports. 

Ministry of Food Processing Industries (MOFPI) 

MOFPI is the main central agency of the Government responsible for developing a strong and vibrant 

food processing sector. There are various financial schemes for technology 

upgradation/establishment/modernization of fruit and vegetable units. 

Ministry of Rural Development 

This ministry implements expansion of area of horticultural crops under employment guarantee 

scheme. 

NABARD 10 

NABARD is an apex institution accredited with all matters concerning policy, planning and operations 

in the field of credit for agriculture and other economic activities in rural areas. It is an apex 

9 

Agriculture and Processed Food Products Export Development Authority 

10 

National Bank for Agriculture and Rural Development 

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refinancing agency with refinance facilities for horticulture production, food processing and other 

agri infrastructure. 

Currently there are multiple departments engaged in horticultural activity in various ministries e.g. 

Ministry of Agriculture (NHM, TMNE, Micro irrigation, NHM, NHB, CDB 11 & NBB 12 ), Ministry of 

Commerce (APEDA, Coffee Board, Rubber Board, Spices Board & Tea Board), Ministry of Food 

Processing Industries and Ministry of Rural Development. 

Schemes and programmes from these Central Government ministries and other schemes from the 

state department of agriculture cover a broad range of activities in horticulture which include 

- Production (Hi Tech horticulture, Micro irrigation) 

- Processing (Capital investment subsidies) 

- Exports (Transport assistance) 

In case of certain schemes, departments under different ministries coordinate their efforts. For 

example, the Ministry of Food Processing Industries and APEDA are jointly working to realise 

possible synergies and convergence between Mega Food Parks and AEZs. 

3.5 Opportunities for intervention in value addition in the FF&V chain 

Organised retail 

Organised fresh produce retail in India has a tremendous potential for companies in the 

Netherlands. Opportunities exist for collaborating / investing in development of fresh produce retail 

chains in backend aggregation, cold chain logistics, demand forecasting, resource planning and 

advanced management systems. 

Infrastructure requirement 

Developing an efficient supply chain for perishable horticulture crop is a pre‐condition for the 

growth of the sector. Fruit, vegetable and flowers require sorting, grading and then pre‐cooling 

before these are transported to far away destinations. This requires huge investment in post harvest 

management infrastructure. 

11 

Coconut Development Board 

12 

National Biodiesel Board 

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A. Terminal markets 

As per a Planning commission report in 2007, it has been proposed that at least one terminal market 

complex (highly capital‐intensive projects with investments ranging between USD 18‐23 mn 

including all post harvest infrastructure) be established in each state. In addition to the above, it is 

also been recommended that a total of thirty terminal markets be established across cities with a 

population of 0.5 million or more. Each of these would be set up at an outlay of USD 11 mn. The 

above terminal markets are expected to be set up with private sector participation and would serve 

as export hubs as well as supply centres for the local market . 

B. Integrated pack houses 

There is increasing demand for integrated pack houses with primary processing facilities for washing, 

sorting, grading, packing, cold storing etc. They also need to be equipped to handle various fruits 

and vegetables products with multiple grading and sorting lines. 

C. Cold storage/Controlled Atmosphere 

The development of adequate pre‐cooling/cold storage capacity/cool chain would help not only in 

increasing the shelf‐life and minimizing post‐harvest losses through proper storage but also help 

farmers in taking timely marketing decisions, overcoming seasonality factor by enhancing marketing 

season, avoid gluts, help in price stabilization, prolong supply of raw material to processing 

industries, besides reducing post‐harvest losses. Modified and controlled atmosphere technologies 

for storage of produce for a longer period are essential for effective marketing of the perishable 

horticultural produce. 

D. Ripening Chambers 

In order to ensure uniform ripening of the produce, optimal and controlled ripening conditions have 

to be initiated and maintained in efficient ripening chambers which have to be created near bigger 

consumption centers. This would add considerable market value to the produce. 

E. Refrigerated transport 

India is estimated to need about 5,000‐14,000 refrigerated containers of standard TEU size (with 

about 0.24 million sq. meters using solar PV panels fixed on their rooftops to be totally independent 

of the power grid or DG sets using fossil fuels), valued at EUR 390 million, to transport the freshly 

harvested produce, placed strategically at various locations in the farms all across the country. 

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Refrigerated containers score substantially over conventional refrigerated trucks in terms of 

suitability for this application in Indian terrain. 

F. Multimodal logistics network 

An end‐to‐end transport network linking the production centres and the consumption centres would 

reduce the seasonal and regional price variations considerably, besides improved quality and shelf 

life of the produce. This network should be developed on the basis of multi modal logistics concepts 

i.e. by using different modes such road‐rail‐sea‐air according to the different target markets. 

Estimated investments required along the fresh produce supply chain 

The envisaged investments in the end‐to‐end value chain of fruits and vegetables is covered in the 

following table. This offers a potential opportunity for the companies from the Netherlands to invest 

and/or provide technology: 

Exhibit 3.19: Region wise estimate of capacity requirement for infrastructure 

Type of Infrastructure Capacity (MT) Rate 

(INR /MT) 

Rate 

(EUR/MT) 

Total cost 

EUR Mn 

North Zone 

Integrated Pack House 2160 800000 13049 28 

Integrated Ripening chambers 1635 750000 12234 20 

Upgradation (including pre‐cooling, 1786400 6000 98 174 

sorting and grading) Creation, and 

revival of Potato Cold Stores 

Deep Freezer 36000 35000 571 21 

Total Cost in EUR mn 243 

South Zone Integrated Pack House 2715 800000 13049 35 



East Zone Integrated Pack House 3335 800000 13049 44 


Upgradation (incl.pre‐cooling, 

1250000 6000 98 122 

sorting and grading) Creation, & 

revival of Potato Cold Stores 

Total Cost in EUR Mn 178 

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Type of Infrastructure Capacity (MT) Rate 

(INR /MT) 

Rate 

(EUR/MT) 

Total cost 

EUR Mn 

West Zone Integrated Pack House 6540 800000 13049 85 


Upgradation (including precooling, 

347200 6000 98 34 

sorting and grading) 

Creation, and revival of Potato 

Cold Stores 


Hilly Areas 


Controlled Atmosphere Chambers 100000 70000 1142 114 


Tribal 

Areas 



North East 


CA Chamber 3000 70000 1142 3 


Establishment of Mega Perishable Commodity Complex at major 

consumption cum export centers 

Integrated Multi Product Multi 

300000 40000 652 195 

Purpose Commodity Complex (6 

numbers, one each in Delhi, 

Mumbai, Kolkata, Chennai, 

Bangalore and Nagpur) 

10000 70000 1142 11 


Grand Total in EUR mn 1026 

Source : Ministry of Agriculture, Rabobank research 

Reefer transport 

Establishment of a fleet of 1,000 refrigerated containers of various size and capacities is required at 

an average investment of EUR 40000 per container (including facilities for its movement and co‐ 

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ordination etc). It is also proposed that 1,000 mobile cooling units (EUR 40000 per unit) be set up for 

providing on‐farm/farm based cooling facilities to reduce the temperature of the produce and make 

it amenable for climate controlled storage thereby enhancing shelf life and quality. This would lead 

to a total investment of EUR 80 mn, with significant share from private players. 

Other investment envisaged in the development of supply chain infrastructure 

1) Capacity Building in pre‐harvest and post‐harvest management for farmers 

2) Human Resource Development (training to various personnel in various government 

departments) to manage infrastructure 

3) Research and Development assistance to State Agricultural Universities (SAUs) and other 

reputed institutions 

National Centre for Cold Chain Development (NCCD) 

It has been proposed that a National Centre for Cold Chain Development be set up under the 

National Horticulture Board. 

Thus, a total investment of EUR 1211 mn is projected for the supply chain infrastructure 

development up to 2012 including contribution of private sector. As a result, companies from the 

Netherlands involved in global sourcing and trade of fruits and vegetable, technology providers and 

equipments manufacturers in cold chain would have potential business opportunities in the areas 

mentioned above. Moreover, the National Centre for Cold Chain Development and Multi modal 

logistics network set up would lead to potential advisory opportunities for organisations/ institutions 

in the Netherlands which are involved in consultancy, research and education in the agri logistics 

and cold chain development. 

Conclusion and road map for players from the Netherlands 

With favourable policy on foreign investment in India, players from the Netherlands have substantial 

opportunities in fresh fruit and vegetable industry in India. In view of increasing demand in 

streamlining the supply chain in FF&V from the emerging organised retail business and also various 

initiatives from the government machinery to develop horticulture in India, expertise of the 

Netherlands in the sector could be optimally used. 

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An indicative road map would be as follows 

a) Opportunity identification 

Identify potential industry players in the Netherlands with matching competencies to offer in the 

FF&V infrastructure development in India 

b) Partner Search 

Identify potential partners for collaboration in the intervention areas in the entire gamut of supply 

chain from production to markets. This could include 

Private sector players with focus and initiatives in quality improvement and aggregation 

Central government bodies 

State departments 

State Agricultural universities 

c) Partnering for value creation 

Various options for value creation in FF&V chain exists such as; 

Offering technological expertise in specific area 

Offering products/equipment/software in FF&V chain 

Tie up with local players for market entry in FF&V market 

o Modern retail 

o Institutional markets 

o Exports 

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Chapter 4 

Floriculture 

4.1 Introduction to the Indian floriculture market 

The INR 10 bn 13 Indian floriculture industry is growing at a rate of 21% per year (2007‐08). The Indian 

floriculture industry has transformed itself from a small scale household gardening business to a 

commercially viable enterprise in the last decade. Currently, floriculture is recognized as a lucrative 

profession. It is an important income generating activity for small farmers and offers an 

economically viable diversification option for corporates in the agribusiness sector. 

Cut flowers and ornamental plants play an important role in the floriculture industry. Though India’s 

contribution to the cut‐flower market is negligible as of now, it has been growing steadily for the last 

couple of years. The chain which includes flower growers in India (especially for fresh cut flowers like 

gerbera, gladiolus, tuberose, lilium and rose), flower exporters of fresh cut flowers, flower 

wholesalers and wholesale suppliers of cut flowers, is being built rapidly across regions leading to an 

intricate network of interdependent individuals and companies. 

4.2 Production 

The major flowers grown in India are marigold, aster, roses, tuberose, gladiolus, jasmine, crossandra 

in open field and gerbera, carnation, roses, anthurium, orchids etc. under green house conditions. 

The wide range of climatic conditions in India makes it a suitable destination for production of 

flowers throughout the year. More than 50% of the floriculture units are based in South zone mainly 

in Karnataka, Andhra Pradesh, Tamil Nadu. (Refer Annexure for a map of India showing the various 

states.) Also West Bengal, Maharashtra, Rajasthan have large areas under floriculture. The domestic 

flower production (loose, cut and dried) is increasing year on year. Moreover, India has a strong and 

rapidly growing domestic market. 

13 

ANI, December 2008 

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Exhibit 4.1 Area and production of flowers 

Year Area (000'ha) Production 

Loose 14 flowers (000' tonnes) 

Cut flowers (million numbers) 

2000‐01 98 556 804 

2001‐02 106 535 2565 

2002‐03 70 735 2060 

2003‐04 101 580 1793 

2004‐05 116 659 2071 

2005‐06 126 694 2762 

2007‐08 160 870 4341 

Source: National Horticulture Board (NHB); APEDA 

As of 2007‐08, the area under cultivation of flowers is 160,000 hectares and has grown at a CAGR of 

8.2% since 1993‐94. Of this, 500 ha of greenhouse based cultivation produces around 5% of total 

domestic flower consumption. In fact, EUR 72 million worth of investments have been made in the 

Indian floriculture industry during the last decade. 

The economic growth and high‐income elasticity for exotic flowers is expected to result in greater 

demand in the near future. Analyzing this future need, enterprising farmers and corporate houses 

have ventured into hi‐tech horticulture viz. protected cultivation under poly houses. The protected 

cultivation of flowers is a widely practiced technology of temperate origin and has made its entry in 

the other parts of the world, where this technology is less known. 

Key crops under protected cultivation in India are roses, gerbera, orchids etc. Gerbera cultivation is 

an area where there is a huge opportunity in the domestic market. States like Karnataka, Tamil Nadu 

etc are the leading gerbera producing states in the country. Orchids have also been grown under 

poly houses in India. Majority of the cultivated orchids are native of tropical climates and are found 

in abundance in the state of Assam, Meghalaya, West Bengal, Karnataka and Kerala. Kalimpong, 

Shillong, Trivandrum, Bangalore, Yercaud and almost all the coastal areas of India are suitable for the 

cultivation of orchids. The domestic market for orchids is currently small but growing at a rapid rate. 

The current business model prevalent in India is that of forging Joint Ventures with foreign players 

for technology (equipments, varieties, planting materials etc) and market linkages. The secured 

14 Loose flowers are the traditional flowers like marigold and chrysanthemum which are grown and sold loose by weight. In most parts of 

the country only local varieties are grown for generations. Jasmine flowers, known for its aroma, are also quite popular as loose flowers. 

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supply of quality produce is offered by the Indian partner in the JV model. Some of the global players 

who have presence in Indian markets are Pressman, Schreurs, Kordes etc. These players provide 

planting materials to Indian growers along with the required market linkage for the end product. 

Cactus is another product which offers a huge opportunity in India. At present, there are very few 

large cactus nurseries in India. They have large collection of Indian succulents, including the species 

belonging to the extremely rare Genus Caralluma family. There are also some private nurseries 

operating in North India (Kalimpong). Though the domestic demand for cactus is currently small, it is 

growing at a rapid pace in the last few years. 

State wise production trends for cut and loose flowers 

Several states have emerged as major flower‐producing zones. These include Maharashtra, 

Karnataka, Tamil Nadu, Andhra Pradesh, West Bengal, Uttar Pradesh, Haryana and New Delhi. While 

Tamil Nadu has the highest acreage under flowers, Bihar has the highest productivity (it is a small 

producer though), followed by Haryana. Moreover, many other states, notably the southern ones, 

excel in the production of high‐quality flowers which are in greater demand in the domestic and 

export markets. 

Exhibit 4.2 State wise area under floriculture (2007‐08) – (total area of 160,000 ha) 

Source: NHB, 2008 

In terms of volume, Tamil Nadu and West Bengal are the leading states in terms of loose flowers and 

cut flower production respectively. 

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Exhibit 4.3 Major loose flower producing states ‐ (total production of 870370 MT) 

Source: NHB,2008 

Exhibit 4.4 Major cut flower producing states ‐ (total production of 4341 million numbers) 

Source: NHB,2008 

The Pune /Lonavala region in Maharashtra, is the leading rose exporting region in the country. The 

region exports about 4.5 to 5 million rose stems during the Valentine's Day season. 

4.3 Demand trends 

The export of cut flowers from India has added an important dimension to the flower trade in the 

country. Another dimension of this growth has been the increase in flower retail shops across the 

country. In addition to the small vendors selling flowers from buckets on roadsides, there are many 

up‐market shops and flower boutiques in major metros. The large supermarket/hypermarket retail 

chains across the country are expected to further stimulate growth. The key markets for flowers 

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include Bangalore, Mumbai, Delhi, Chennai and Chandigarh. This kind of home market is a unique 

strength for India. Many of the other developing countries producing flowers for export, such as 

Ethiopia and Kenya, do not have such an advantage. The Indian floriculture industry is emerging as 

an attractive sector for investments, in view of high returns per unit area 15 . 

4.4 Legal and taxation aspects 

There is currently no excise duty 16 and Cenvat 17 (Central Value Added Tax) for fresh flowers, roses, 

carnations, orchids, chrysanthemums, cut flowers, flower buds for boutique or ornamental purpose, 

fresh, dried, dyed, bleached, impregnated or otherwise prepared. For decorative plants made of 

artificial flowers and products manufactured out of artificial flowers there is an excise duty of 3% 

and Cenvat of 10%. Overall customs duty on imports is 60% and there is cess (tax) as below: 

• Carnations 3% 

• Roses 3% (cut, fresh, dried, bleached, dyed etc.) 

• Flowering plants (excluding roses and rhododendrons) 3% 

• Grafted roses 3% 

• Carnations, orchids, chrysanthemum cess 3% 

• Cess for flowers other than mentioned above is nil 

There is no export duty on floriculture products. Indian cut flowers face a higher import duty in 

Europe during May‐October. 

4.5 Government initiatives 

Some of the initiatives taken by the Government of India in the floriculture space are : 

Flower Auction Centre at Bangalore 

The auction market in Bangalore is spread across 5.11 acres. There is an automatic cold storage 

system with a capacity of handling 250,000 stems. The centre is equipped with an internet enabled 

auction process linked to an online accounting process. It is run by the International Flower Auction 

15 

Estimated returns (Internal Rate of Return) as high as 45‐50% as per industry sources, 2008 

16 

tax levied on manufacture, sale, or use of locally produced goods 

17 

paid on the products manufactured, the tax paid on inputs, raw materials, capital goods and input services‐ utilized in manufacture of 

final products of a manufacturer 

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Bangalore Ltd (IFAB Ltd). There are six new Agri Export zones for floriculture been planned; two in 

Tamil Nadu, one each in Uttaranchal, Maharashtra, Sikkim and Karnataka. 

Cold storage facility at key Indian airports 

The Government has provided infrastructure required for the cold storage facility at the key airports 

namely New Delhi, Mumbai, Hyderabad, Bangalore, Chennai, Trivandrum and Cochin. 

Market Facilitation Centre at Aalsmeer, The Netherlands 

To provide visibility for various floricultural products from India to international buyers, Government 

of India has established a market facilitation centre at Aalsmeer. The Government provides 

assistance in designing experiments to simulate the perfect logistics chain from farm to market. The 

centre also provides assistance to new entrants for fresh registrations at various European auctions. 

4.6 The India advantage in floriculture 

Due to the technological advancements, especially in the Northern Hemisphere, the flower 

production was perfected under protected environments with state‐of‐the‐art‐facilities for microclimate 

management. On the other hand, favorable environmental conditions in other parts of the 

world helped promote flower production without much microclimatic manipulation. Increasing 

energy and labor costs coupled with stringent environmental regulations are encouraging leading 

producers from the developed countries to enter into off‐shore production centers in the developing 

world. As a result of this trend, Indian entrepreneurs ventured into floriculture business, especially in 

sourcing technology, and forming alliances with some of the leading global players or entering into 

buy–back agreements. Several large and medium corporate houses ventured into this activity in late 

1980s and early 1990s. 

The significant advantages that India has to offer are: 

‣ The diversity of agro climatic zones available in the country presents it with a capability to 

cultivate a variety of tropical and temperate flowers. 

‣ India has wide variety of soils suitable for growing various crops, which reduces the dependency 

on costly artificial media. 

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‣ India enjoys the advantage of a favorable agro climate, cheap and skilled labour, and cheap 

arable land 

‣ Abundant sunshine throughout the year especially in autumn and winter is perhaps a blessing for 

year‐round production of the crop without depending on artificial light and related cost 

escalation due to additional energy inputs. 

‣ There is good growth potential in the domestic market on the back of the consumerism boom in 

urban India. 

‣ India is relatively close to large markets like Japan, Australia and emerging markets like the 

Middle‐East. 

‣ In rose (main cut flower for India in export trade), India has a shorter production cycle (only 45 

days) of pruning to harvesting compared to 55‐60 days in Kenya and Ecuador. Hence precise 

programming of flowering is possible in Indian conditions that meet peak market demands. 

‣ During the peak demand worldwide in November‐March (Christmas, New Year Day, Valentine’s 

Day etc.), the weather in India is quite conducive for top quality flower production. At the same 

time unlike other African countries, this period is free from adverse climatic disturbances like 

unpredictable monsoon or rain storms. 

4.7 International market 

Europe, North America and Far East have been the major consumers and suppliers of floriculture 

products in the world. However, in recent times while the demand continues to remain firm in the 

western world, cheaper imports are becoming a major source of supply. This is due to high costs in 

setting up floriculture projects in these western markets involving expensive glass houses, heating 

and lighting equipment, less‐labour oriented technology and catering to environmental regulations. 

These high investments may not be applicable in many tropical countries with higher altitudes like 

India, where the climate is naturally conducive to grow year around (warm days, cool nights, longer 

hours of sunshine etc). This has led to production base shifting to third world countries in South 

America, Africa and Asia (Ecuador and Colombia in South America for North American markets; 

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Kenya and Ethiopia in Africa for European markets; India, Thailand, Korea in Asia for Far East Asian 

and European markets). Cross‐continent trade is limited because of high air freight costs. 

During the year 2007, European countries imported a total USD 13.6 billion worth of floriculture 

products of which about 17% came from outside of Europe. New areas of demand are also emerging 

in fast developing countries in Eastern Europe and Asia. This huge market space highlights the 

growth opportunities in the sector for Indian floriculture companies. 

At present, India’s share in the world trade is about 0.18%. Indian floriculture industry has been 

shifting from traditional flowers to cut flowers for export purposes. India’s export of floriculture has 

increased from INR 2900 million (EUR 45 million) in 2005‐06 to INR 3688 million (EUR 57 million) in 

2008‐09. India majorly exports to US, Japan, U.K, Netherlands and Germany. Trade liberalization has 

not only facilitated imports of latest technology, but also encouraged and enhanced import of 

internationally acclaimed planting material of different varieties. The Government of India has made 

various provisions and introduced a variety of incentives helping to establish 100% Export‐Oriented‐ 

Units (EOU’s) resulting in a vibrant floriculture industry in India. The increasing corporatization of the 

sector could help India become a big player in the global floriculture market in the long term. 

Along with the export industry, the growing demand in the domestic market also holds promise for 

the future. The present market is estimated to be c. INR 10 Billion (EUR 153.8 Million) and its further 

progression can facilitate absorption of technology and experimenting with new products. 

Target market for floriculture exports 

Previously most exporters have focused only on the EU as a preferred market for sale through the 

auctions. However, over the past few years exporting units have developed and increased their 

concentration in the Japanese and Australian markets. Export realizations over the past five years 

from the EU have displayed a declining trend whereas realizations from Japan, Australia and New 

Zealand have been increasing. 

While the focus is slowly shifting to different markets, EU remains an important destination for 

India’s cut flowers which is evident in the fact that Europe together with Japan, accounts for 76% of 

the total Indian cut flower export realizations and 88% of the total cut‐flower export volumes. 

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Exports from India 

Floriculture exports from India during 2008‐09 were INR 3688 Million (EUR 57 million). 

Exhibit 4.5: Top five export destinations for Indian flowers 

Country Volume (MT) Value (EUR Million) 

USA 7111 11.5 

Netherlands 4640 9.5 

U.K 4370 6.8 

Germany 3590 6.3 

Italy 1268 2.2 

Source: APEDA, 2009 

Despite 25% of the global production area under floriculture, India accounts for only 0.18% of global 

trade in value terms. India has replaced the Netherlands as the second‐largest exporter of cut 

flowers to the Far‐East nations. Floriculture exports are expected to increase at a CAGR of 15% over 

the next 5 years. 

In the two key export markets, viz. Europe and Japan, India faces intense competition from East 

African countries like Kenya, Tanzania, etc. (in the EU market) and from South Korea, Thailand and 

Australia/ New Zealand (in the Japanese market). These countries have immense production 

capacities and provide the varieties which match international standards. 

4.8 Key issues pertaining to the Indian floriculture sector 

Import duty disadvantage 

India suffers an import duty disadvantage in exports of floriculture products to EU. On the other 

hand most other countries enjoy duty exemptions; Columbia, Ecuador, Israel, Poland and Hungary 

enjoy zero duty on imports from them. 

Period 

Import duty in EU pertaining to imports from India 

If certificate of origin is not sent 

If certificate of origin is sent 

Summer 12% 10% 

Winter 8.5% 7.2% 

A high import duty in Europe during the non peak months (May–October) makes it uneconomical for 

Indian players to cater to the market in the off season. This has prevented Indian floriculture 

products from having market access during the crucial months in Europe. Given the fact that the 

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prices of the cut roses in Dutch auctions have been falling since 1994, and more so in the May‐ 

October period, a higher import tariff during low price seasons will severely constrain India’s efforts 

to establish a steady annual market in Europe across seasons. 

Therefore, due to the higher net return, it is not surprising that over half of the Indian roses are 

shipped to Japan. Apart from roses which are exported mainly to the Netherlands or Japan, the 

Indian dry flowers (statice, helichrysum, bottle gourd, cane and bamboo strips, wheat, corn and 

barley strips and a diverse basket of wild native species) are exported to a wide array of countries. 

Freight cost disadvantages 

Air freight from African destinations to Europe is EUR 1.2 /kg. Air freight from Israel to Europe is 

currently at EUR 0.56 /kg. Costs of Indian roses run from INR 1.86 to INR 4.6 per stem packed and at 

the airport ready to ship (depending whether interest and royalty costs are included). Freight to 

Europe is EUR 1.60 to 1.82 per kg or EUR 0.054 per rose or about the same as the rose production 

cost. As a result, the average return for exported Indian roses during the September–March shipping 

season, including the benefits of the Valentine’s Day export flush, is around EUR 0.20 per stem. In 

Japan, the average price for Indian roses is Yen 25‐35 per stem (EUR 0.17). Freight to Japan is about 

EUR 1.09 per kg or only 60% of the freight cost per kg to Europe, even though the actual distance to 

Japan is greater. 

Indian fresh cut flower exporters face a 50‐60% airfreight cost disadvantage vis‐à‐vis their 

competitors from East Africa. This disadvantage is a result of the following reasons: 

- India has a geographical disadvantage resulting into higher freight rates for the Europe and 

Japanese markets as compared to their competitors. 

- Inability of Indian exporters to get either airfreight discounts to charter a full aircraft load due 

to low volumes. 

- Frequent airfreight rate increases due to sharp hikes of rate in jet fuel prices. 

- Fall in airfreight rates for competitors (mainly east Africa) due to economies of scale and use of 

dedicated aircrafts/charter flights. 

For India to increase its exports, it needs to focus either on having adequate capacity to fill a 

dedicated air plane or restrict itself to available cheap air transport facility and negotiate lower 

transport fares to use air capacity on regular flights. 

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Scale of operations 

In an increasingly competitive market and with an expanding market width, it is imperative that the 

focus should be on achieving economies of scale. This would not only reduce per unit cost but also 

help players gain access to a larger market. Indian players are at a disadvantage compared with most 

growers in East Africa. This is mainly due to their larger scale of operations vis‐à‐vis India. This 

enables them to have economies of scale and to offer a wide range and color of flowers, in the 

quantities/batch sizes as desired by international customers. Increase in size also enables units to 

integrate and move up the value chain. Vertical integration between producers and buyers for 

instance, has helped East African units to effectively control the distribution and marketing process 

i.e. large African farms having direct ‘farm to market’ linkage with their buyers. 

Inability to adapt to changing consumer trends 

The consumption markets for floriculture exports are gradually shifting from specialty shops/ florist 

shops to the super market chains, mainly in Europe and the US. Chains like TESCO, Salisbury, Wal‐ 

Mart, Sear, K‐Mart etc., are mass consumers and require large quantities of uniform flowers, with 

well‐defined and strict specifications, and reliable and fast delivery. 

Floriculture is also a ‘fashion’ product and the international market continuously demands the latest 

varieties, fresh/new colors, novelty flowers etc. In order to produce the latest varieties /colours that 

are in demand in the international market and to compete with other exporting countries, it is 

imperative that high quality planting material of the latest varieties are used and also replanted 

periodically in order to maintain the acceptable freshness in variety and quality. 

Ageing plantations 

The plantations (greenhouse floriculture) in India, which, over 90% are roses, are mostly of the older 

varieties. Also, there are old plants of over 6 years, whereas the peak productive phase of the plants 

on an average is only 3‐5 years. This leads to the quality of the cut flower being severely affected. 

Only 40% of the units in India equipped with the requisite resources, have restored to plantation. 

Difficulties in catering to year‐round supply 

Currently, India exports mainly six months a year. Due to high temperatures faced in many parts of 

the country, production is affected during the summer months of March‐May each year. During this 

period the crops are rested and the bud sizes fall sharply. As a result, the production is severely 

affected and an export opportunity such as, Mother’s day (May) cannot be fully capitalized upon. In 

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contrast, units from East Africa are able to supply flowers and meet the demand requirements 

throughout the year. 

Quality‐related issues 

Units in India often face quality issues for their produce. This is mainly due to poor/ ageing planting 

material, lack of timely availability of chemicals and fertilizers, etc. Further, post harvest methods 

need constant upgradation to ensure that the quality required by international markets is 

maintained. This necessitates investments in post‐harvest infrastructure like forced cooling systems, 

clean and constant temperature monitoring mechanisms, material handling systems etc. However, 

most units are under immense financial strain and are thus unable to invest in such facilities. 

Consuming markets for flowers require consistency and quality of the supplies, which Indian 

suppliers sometimes fail to deliver. In the Netherlands growers with a good reputation fetch a higher 

price. Indian growers are too small and their names are not easy to remember. 

Quality certification is essential for export sales and offers exporters a competitive advantage over 

other suppliers from competing countries. Most international buyers are also beginning to demand 

quality control certificates. The super‐markets in the UK for instance will be making such certification 

mandatory for its suppliers. 

4.9 Opportunities for Dutch floriculture companies in India 

Fresh cut flower exports 

India’s share in global (export) cut flower trade is less than 1% currently. The fresh cut flower (95% 

of it is Rose) exports have increased at 13% annually since last ten years. In India the focus states for 

fresh cut flowers exports are Tamil Nadu, Karnataka and Maharashtra. 

Dried flower /foliage and high value oil extracts exports 

The fresh flower trade constitutes only one aspect of the overall floriculture sector. There are other 

equally, if not more, important segments of this sector which are doing well and have the potential 

to grow. Notable among them are the production and marketing of dry flowers and the production 

of high‐value oil extracts and perfumes, dyes and other products, such as rose water etc. Dry flowers 

already form a sizeable chunk of Indian floriculture exports. Dried flower exports constitute 60% of 

the export basket currently. Dried flowers are exported mainly from Tamil Nadu and West Bengal. 

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Unfortunately, the dry‐flower industry is not well organized and relies, to a substantial extent, on 

gathering of flowers from the wild and drying them using conventional methods. However, some 

fresh flowers are also converted to dry flowers for better returns. These include dahlias, marigold, 

jute flowers, wood roses, lotus pods and lilies among others. 

Flower extracts offer another great opportunity for value‐addition and enhancing of returns as these 

enjoy a good domestic as well as export market. The cultivation of the Damask rose owes its 

popularity largely to its demand for extraction of oil and preparation of rose water and gulkand 18 . 

Products made of jasmine, tuberose and vanilla also find a ready market in the cosmetics industry. 

Several flowers, like marigold, have good use in the production of natural dyes, the demand for 

which is rapidly increasing due to growing preference for natural products. In fact, the pigment 

produced from marigold has found a new use in the poultry industry, where it is fed to chickens to 

impart a tempting colour to their meat and egg yolk. 

Outsourcing of flower production to India 

As the cost of production in India is relatively lower than that in other developed countries, 

outsourcing flower production to India could be a good business model. JVs / technology tie‐up 

arrangements could be explored wherein sourcing technology and quality planting material could be 

provided by companies in the Netherlands who in turn would enter into buy back agreement with 

floriculture players. For example, KF Bioplants, a domestic company in India was set up as a JV 

between Kumar Gen Tech and Tissue Culture Company (KGTC) and Florist de kwakel b.v., Holland. 

There is also an opportunity for using India as a production base for cactus. The private nurseries 

have developed various varieties of cactus and are capable for propagation in large number to be 

exported to other countries. Companies from the Netherlands can explore opportunities with 

domestic players in India. 

Potential for association of Indian institutes with universities in the Netherlands 

In India, sector research on floriculture has been scattered over a large number of agricultural 

research institutes and farm universities. Most of the research is focused on areas like variety 

development, best practices for cultivation etc. The existing floriculture players solely rely on 

independent external consultants from countries like Israel, The Netherlands etc. There is an 

18 

a sweet preserve of rose petals 

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opportunity to explore an association of Indian institutes with the universities in the Netherlands to 

cater to these needs for the industry. 

This could involve the following areas 

- Training of trainers for supply chain management, value chain management etc. This is already 

happening to a certain extent. 

- Post Harvest Management 

- Development of course curriculum. 

- A PhD programme in the Netherlands 

- Consultants from the Netherlands are needed for understanding proper techniques for 

growing of flowers. Training tie‐ups for bulb production, forcing of bulbs (production of 

flowers from bulbs) and seedling production is another area for collaboration. 

- Technology tie‐up for packaging of floriculture produces for export and domestic market. 

Standardization of packaging for export consignments. 

Supplying technology to growers and other players in the chain 

There are very few quality players who provide end to end solutions to the floriculture players i.e. 

from selection of land, infrastructure development, training, planting material, project management 

and customers. Also, there are few players supplying green house structures and allied materials to 

the industry. Most of them import the materials from countries like Israel etc. Companies from the 

Netherlands might look at exploring opportunities with them. 

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Chapter 5 

Bakery equipments 

While the focus of this chapter is on bakery equipments, a brief overview has also been provided of 

the Indian bakery industry to provide the right context. 

5.1 Introduction to the bakery industry 

The bakery market in India is estimated at more than EUR 3.2 billion (INR 210 billion) and is still the 

cheapest form of ready‐to‐eat food. The bakery industry is one of the largest among the processed 

food industries in India. In fact, India is the second largest producer of biscuits after the U.S. The two 

major bakery products, viz. bread and biscuits account for c. 90 percent of the total bakery products. 

The annual production of bakery products (organized sector), which includes bread, biscuits, 

pastries, cakes, buns, rusk etc., is estimated at c. 4.7 million tonnes. 

Exhibit 5.1: Market volume of bakery products in India (million tonnes) 

Products Organised Unorganised Total 

Bread 2.6 2.6 5.2 

Biscuit 1.7 1.1 2.8 

Cakes and pastries 0.4 0.5 0.9 

Total 4.7 4.2 8.9 

Source: Euromonitor, Industry estimates 2009 

5.2 Industry structure 

The bakery industry in India is mainly concentrated in the states of Andhra Pradesh, Maharashtra, 

West Bengal, Karnataka and Uttar Pradesh. (Refer Annexure for a map of India showing the various 

states.) About 60 percent of production takes place in the unorganised sector. There are around two 

million unorganised bakeries operational across the country, comprising small bakery units, cottage 

and household type manufacturing, characterized by low levels of packing and distribution mainly in 

neighboring areas. The organized sector consists of large, medium and small‐scale manufacturers 

producing bread and biscuits. A large proportion of sales of bakery products are made through 

numerous regional manufacturers, who largely compete on the basis of price. Bread and biscuits are 

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low margin ‐ high volume businesses. Moreover, about 40 percent of bread and 50 percent of 

biscuits are sold in the rural market. 

Bread 

About 50% of this segment is organized and is growing at 4‐5 percent per year. The estimated size of 

the organised bread industry is about EUR 0.77 billion (INR 50 billion). Breads are not a significant 

part of Indian meals so far (except breakfast). However, there has been an increasing acceptance of 

breads especially in urban areas on the back of increasing income levels and lifestyle shifts. 

Hindustan Unilever Ltd. (HUL) through its acquisition of Modern Foods, has become the largest 

player in the branded bread segment followed by Britannia Industries Ltd. Together, these two 

companies’ account for around 90% of the branded bread market, catering to the high and medium 

price segments. Local manufacturers armed with numerous local brands tend to target the mass 

market segment and contribute substantially in the bread segment. The bread industry is 

characterised by miniscule profits margins and high levels of fragmentation. 

Exhibit 5.2: Value share in bread (organized market) 

15% 

39% 

Packed/industrial 

3% 

4% 5% Brown bread 

Multi grain bread 

White 

61% 

unpacked/artisanal 

Wholewheat bread 

Others 

73% 

Source: Euromonitor, 2009 

A number of small players use outdated technologies and traditional methods of manufacturing 

baked goods. In order to keep costs to a minimum, these players tend to compromise on the quality 

of the end product and packaging. Thus, most bakery products are positioned in the lower end 

economy segment. 

White bread is the most popular type of packaged/industrial bread in India with a 73 percent retail 

value share in 2009. Most consumers tend to buy white bread due to its wide availability, product 

familiarity, and economical price. However, increasing health consciousness has led to the growing 

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popularity of brown, multi grain, and whole wheat bread. Fortified/functional and naturally healthy 

bread is slowly making its presence felt in urban areas and these are sold as premium products. In 

volume terms bread is projected to grow at 1.9 percent where as value added breads are expected 

to grow at 18‐20 percent. 

Biscuits 

In terms of volume, the market for biscuits has a near equal split between the organized and the 

unorganised segment. The major players from the organized sector are Britannia, Parle, and ITC. The 

estimated size of organised biscuit industry is about EUR 1.1 billion (INR 69 billion). 

Exhibit 5.3: Volume share of biscuits (organised) 

8% 

Glucose 

13% 

12% 

10% 

44% 

Marie 

Cream 

Crackers 

Milk 

13% 

Others 

Source: Federation of Biscuit Manufacturers’ of India, 2008‐09 

The popular glucose category provides volumes while the other segments provide higher margins. 

Biscuits in India are increasingly being positioned as premium products, with manufacturers moving 

away from low margin, high volume glucose and salty biscuits and introducing cookies, cream 

biscuits, as well as health based offerings. 

The per capita consumption of biscuits is c. 2.4 kg in India as compared to more than 10 kg in the US, 

UK and the Western European countries and above 4.25 kg in South East Asian countries like 

Singapore, Hong Kong, Thailand and Indonesia. This shows the huge untapped potential of the 

biscuit industry in India. 

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The leading players, Britannia and Parle Products, account for a combined retail value share of c. 63 

percent 19 , followed by a strong third ranked player, ITC. In addition, there are a number of regional 

players in biscuits, such as Surya Food & Agro Pvt Ltd, Saj Industries Pvt. Ltd, Anmol and Dukes. 

Artisanal products sold through bakeries also account for a major share of sales. 

In recent years, the biscuit market is growing at the rate of 9.9 percent per annum in volume terms. 

The cream and specialty biscuits have grown at a faster rate of 15‐20 percent per annum. It is 

estimated that the biscuit market would grow at 8 percent per annum over the next five years. 

Other bakery products 

Other bakery products such as cakes and pastries are growing at around 8‐10 percent annually. 

These products are largely limited to urban areas. The revenue realization in terms of unit volume is 

higher in this product category due to higher value addition. About 90 percent of pastries are sold in 

unpacked/artisanal form. Companies such as Britannia have launched single portion packs, which 

has boosted the sale of packed cakes. 

Exhibit 5.4: Volume share of pastries and cakes (organised market) 

Pastries 

Cakes 

10% 

40% 

60% 

90% 





Source: Euromonitor, 2009 

Breakfast cereals 

The organised breakfast cereals market is estimated at 10,000 tonnes and contributes about EUR 29 

million (INR 1.9 billion) to bakery products by value. The segment is growing at 11 percent annually. 

Factors such as cultural differences, easy availability of low priced traditional breakfast options are 

19 

Euromonitor report, 2009 

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seen as challenges in this sector. However, players such as Kellogg’s have been steadily attempting 

to overcome these challenges through innovative offerings, catchy advertising, efficient supply chain 

network and customized products. 

5.3 Key drivers 

A. Changing lifestyles 

With increasing number of families in urban areas where both spouses are working and the 

availability of ready‐to‐eat bakery products at reasonable prices, many urban households have 

started eating bread based products at lunch and dinner as well. The sheer convenience offered 

by bakery products has resulted in Indian breads gaining market share. Also consumers today 

are seeking a variety of baked foods and are ready to experiment. With ease of availability of 

different ingredients used in baking value added products, consumers are also seeking premium, 

gourmet and exotic products to satisfy their desire to indulge. This shift has resulted in 

innovative products development such as ‘masala’ bread, cheese bread, cheese cakes, subs etc 

B. Increasing preference for branded and packed cakes 

Consumers are upgrading from unpacked/artisanal cakes to packed industrial alternatives. As 

compared to multi‐portion cakes, single portion cakes are typically much more affordable and 

enable consumers to eat the product in one go. Furthermore, single portion cakes are available 

in a wide variety of variants /flavours. Single portion cakes also benefit from a wider distribution 

reach, from rural retail outlets to urban supermarkets, whereas the distribution of multi‐portion 

cakes remains largely restricted to urban areas. 

C. Health consciousness 

Increasing health awareness is giving a push to consumption of brown bread, multigrain bread, 

whole wheat bread, multivitamin bread etc. Fortified/functional products are also gaining in 

market share in the urban areas. Moreover, there are an increasing number of ‘baked‐not‐fried’ 

snacks being launched which aim to take share away from the traditional potato chips. 

D. Favourable tax structure 

The various taxes levied on the industry have come down in last couple of years. The reduction 

of excise duty on bakery product from 16 percent to 8 percent coupled with ‘zero’ excise duty on 

biscuits priced below INR 100/kg has made bakery products more affordable to consumers. 

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Going forward, the industry has proposed to the Government for reduction of VAT (value added 

tax) from current 12.5 percent to 4 percent. 

E. Growth in organized retail 

The proliferation of modern supermarket chains across India has greatly helped in leveraging 

innovation in the bakery products because consumers who shop in modern stores expect 

greater variety and convenience. Many of these modern stores also sell their own private label 

bakery products. However, in‐store bakery sales have yet to account for substantial sales in 

India, as traditional kirana 20 stores dominate retailing. Moreover, independent bakeries, which 

produce fresh products, remain the preferred choice for consumers of baked goods. Currently, 

very few private labels are available and account for less than 1% of value sale of bakery 

products. However private label share is expected to increase due to entry of international 

chains and overall growth in organized retail. 

F. Food service 

The organized food service sector in India is growing at 12‐15% annually. Current sale from retail 

in‐store bakery and food service outlets is about 1‐2 percent of the total market. Various fast 

food outlets and cafe formats serving baked products are growing across India (refer Exhibit 5.5). 

International chains such as Subway, Dominos, Pizza Hut are expanding their franchise to Tier‐II 

cities. The growth of fast food/café chains would result in increased consumption of baked 

products across the country. 

Exhibit 5.5: Fast food/café chains serving baked product 

Chains Outlets 21 Product offerings in the bakery segment Future plan 

(outlets) 

Café Coffee Day 854 Value added gourmet baked product 1000 

Barista 220 Value added gourmet baked product 500 

Costa coffee 40 Value added gourmet baked product 300 

Pizza Hut 147 Pizza 400 

Domino’s 274 Pizza 400 

20 

similar to Mom and Pop stores 

21 

estimates as of February 2010 

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Chains Outlets 21 Product offerings in the bakery segment Future plan 

(outlets) 

Pizza corner 47 Pizza NA 

Monginis 430 Cakes & pastries NA 

Bread talk 7 Exotic value added breads and baked products NA 

Daily bread 36 Bread, cakes and value added baked products 250 

Hot breads 40 Bread, cakes and value added baked products NA 

Fresh choice 14 Bread, cakes and value added baked products 100 

Cookie‐man 41 Premium end cookies 250 

McDonalds 170 Burgers 210 

Subway 156 Subs 200 

Source – Rabobank research 

5.4 Bakery Equipments 

Equipments can be divided into industrial line (required by bread and biscuit companies for mass 

production) and non‐industrial lines (required by individual bakeries). Ovens (rack and deck), 

sheeters, mixer, divider & rounder, freezer, biscuit moulding and cutting machines and bread slicer 

are some of the key equipments used by the industry. Current size of the equipment industry is 

estimated at EUR 23 million (INR 1500 million). About 80% of the bakers are small scale bakers who 

use domestic make low‐end equipments for their day‐to‐day operations. These equipments are 

‘average quality‐low price’ vis‐à‐vis imported equipments from developed countries (refer Exhibit 

5.6). About 85% of equipments used by the industry are from domestic manufacturers. The Indian 

bakers prefer domestic equipment because they neither have the required scale to justify the higher 

investment in high end machinery nor do they have a significant customer base who are ready to 

pay for the premium products. 

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Exhibit 5.6: Price comparison of equipments (landed price in India) 

Equipments Indian Made (EUR) Chinese made 

(EUR) 

European made 

(EUR) 

Planetary mixer (60 Ltrs) 9000 2000 27500 

Spiral Mixer (20 Kg) 750 675 4500 

Divider/rounders 4500 2200 15500 

Rotatory oven 8900 6000 30000 

Source: Industry Players (prices are estimated values, 2008‐09) 

Key issues with bakery equipments 

A. After sales service 

After sales service is one of the biggest hindrances in the success of imported machineries. Most 

of the domestic manufacturers do not have a good after sales service programme. The after 

sales service of imported machineries is undertaken by importers in India who often fail to 

satisfy the customers. Merely appointing dealers in India is not adequate for foreign players. 

They need to also provide an excellent service network to compete with domestic players. Dayto‐day 

running and maintenance is seen as a bigger issue by the industry than the initial cost of 

the machines. 

B. Old and inefficient equipments 

Old and inefficient set of equipments are still being used by most of the traditional bakers. This 

significantly impact the quality and efficiency of the bakers resulting in higher operating costs. 

C. Reverse engineering (‘copying’) of imported machines 

Indian manufacturers often copy the imported machines and develop them locally. These are 

largely similar to imported machines in look, feel and functioning with prices being significantly 

lower as compared to imported ones. 

D. Training 

Investment in training of manpower is required for handling of imported equipments. Since the 

after sales service is an issue, foreign players have to ensure that people are adequately trained 

for good upkeep of equipments and obtaining optimum results. 

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E. Costly maintenance of imported machines 

The lack of an organized set up in India by foreign players leaves Indian customers with little 

choice but to deal with importers for after sales service. Importers charge exorbitant rates for 

maintenance. Lack of multiple avenues for after sales service makes the Indian buyer vulnerable 

to the terms and conditions imposed by the importer. Also, the spare parts of imported 

machines are not easily available. Keeping a full time technician is a costly affair and can only be 

afforded by large scale players (institutional players, food chains etc). 

Marketing channels 

Domestic 

Domestic equipment manufacturers operate through a network of dealers and sub‐dealers across 

the country for selling their products. Dealers can be exclusive or non exclusive and are responsible 

for selling and marketing of products in the designated region. Dealers take orders for equipments 

and also take part payment as advance before the manufacturing of equipment. The network 

operates with low inventory and equipments are manufactured after undertaking order from the 

customer. There are many manufacturers of bakery equipments across India, many of whom also 

import equipments from other countries. (refer Exhibit 5.7) 

Exhibit 5.7: List of some of the equipment manufacturers and traders in India 

S.no. Company Manufacturer Exporter Importer 

1 Growthways Technology √ 

2 Rolex tin & Metal Works √ √ 

3 Naik oven Manufacturing √ √ 

4 Soni Engineering works √ √ √ 

5 Asifo √ 

6 Baker Enterprise √ 

7 Maxheat Furnace √ 

8 HCS Enterprise √ √ 

9 Besto Oven √ √ 

10 A.V. Engineering works √ 

11 Arun Machinery √ √ 

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S.no. Company Manufacturer Exporter Importer 

12 Prima Engineering √ √ 

13 Indian foods Pvt Ltd √ 

14 JMB bakery equipments √ √ 

15 Apple Bakery machinery √ √ 

Source: Rabobank research 

Import 

The importing channel is very similar to domestic channel with importers also having dealers in 

various regions. In some cases importers are also domestic equipment manufacturers. The importer 

usually places an order on exporting destination once a confirmed order has been obtained from the 

customer. The lead time is relatively higher in the import channel compared to domestic channel. 

Most of the foreign players prefer to use existing manufacturers or traders network as the cost of 

setting up own dealer network is high. In India, bakery equipments are largely imported from EU, 

South Africa, China and Taiwan. Some of the equipments which are imported in India are highlighted 

in Exhibit 5.8 

Exhibit 5.8: Currently imported equipments 

Companies Country Product 

Bearvarimixer Denmark Mixer 

Rondodage Switzerland Dough Sheeter 

Revent Sweden Oven 

Sveba‐dahlen Sweden Oven 

JKV Holland Moulding machines 

Kaak Holland Bread lines 

Salva Spain Oven 

Sancassio Italy Mixer 

Erika Record Germany Bun Divider 

Macadams South Africa Oven 

Sinmag Taiwan Oven 

Source: Industry sources, 2009 

Of late, there is an increasing demand for equipments made in Taiwan as they provide a slightly 

superior quality at slightly higher price point. EU and South African machines are largely imported by 

large institutional players, hotel chains and international food service chains. Other domestic bakers 

import Chinese or Taiwanese machines based on the right fit for their requirements. 

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Exhibit 5.9: Comparison of imported machines 

Features 

EU & South Africa 

China 

Taiwan 

Source: Rabobank research 

‣ Costs almost 3 times the domestic products 

‣ Quality of final product improves significantly 

‣ Support usage of better ingredients resulting in better final product 

‣ Cost is same or lower than domestic product 

‣ Poor quality and durability 

‣ Better quality then Indian and Chinese product 

‣ Price marginally higher (10‐20%) than Indian products 

Duties and taxes 

Import duty on bakery equipments range from 21% to 37% (import of capital goods). The high duties 

further increase the cost of the imported goods. For the equipments produced locally, there are 

various taxes like excise, CST (central State tax) and Value‐added‐tax (VAT) ‐ refer Exhibit 5.10 

Exhibit 5.10: Duty and tax structure on bakery equipments 

Import Duty on bakery equipments 

21% ‐ 37.6%, under capital goods import 

Domestic Taxes 

Excise 

9% 

Central State tax (CST) 

2% 

Value added tax (VAT) 

12.5% 

Source: Industry sources, 2009 

5.5 Opportunity for bakery equipments 

Over the past few years, bakery products have shown a marked improvement in volumes and 

customer base due to growth in bread and biscuits segment. In the long run, the bakery segment 

could witness intense competition as more organized players enter the market. The number of highend 

products will increase, improving the margins of the companies. The changing lifestyles of Indian 

population will also result in higher offtake of bakery products. 

Shift from handmade to mechanization‐technology is yet to make a big impact in the bakery 

industry. Bakers are trying to maintain a balance between mechanization and labor. Organized 

retail’s in‐house bakeries, food service chain and institutional players are also driving the change 

towards mechanization. Demand is rising for equipments that can produce convenient high quality 

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bakery products. Consumers have started to appreciate quality. However, the base of consumers 

ready to pay a premium is still very small (1‐2 percent). 

Key targets would be organized players, modern retail and food service chains. Considering the 

growth rate of various segments of bakery industry it is estimated that besides the current market 

there is a potential new market for equipment capacity equivalent to 1.2 million tonnes of baked 

product (refer Exhibit 5.11). In order to penetrate the India market, it is important to focus on after 

sales service. As suggested by some of the industry players, initial cost of machine is not such a big 

factor as is the after sales service. Foreign companies can either have their own setup for servicing 

clients or have JVs with some of the Indian players with proper focus on the after sales service as 

having own setup may need a minimum scale. 

Exhibit 5.11: Estimated potential market for bakery equipment 

Organised market Growth rate Current target market 

(tonnes) 

A 

After 5 years 

(tonnes) 

B 

Opportunity 

(tonnes) 

B‐A 

Bread 50% 1.9% 2,600,000 2,856,566 230,909 

Cakes & 

Pastries 

40% (Industrial 

production) 

7% 400,000 561,021 161,021 

Biscuit 50% 8% 1,700,000 2,497,858 563,194 

star hotels 

(3,4,5) 

10% of Total 

hotels 

7% 2,190 3,072 882 

Food service

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Annexure – I 

Map of India showing the various states 

----------------------------------------------------------------------------------------------------------------

The India opportunity in Food and Agribusiness Final ... - Efresh India

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