Farm to Retail

IT, Pharma and Auto are the key scetors for India when it comes to Exports. Thats what was heard through series of presentations in the CII- ‘UK Trade &Industry’ conference held in London (27th June) on promoting trade ties bewteen India and UK.

So far, agriculture has been far away from the consideration set when it comes to candidate export industries.

In my opinion there are following reasons/doubts-

1. Protective Import barriers on agri trade by western countries.

2. Lack of Cold Storage/Supply chain. No wonder 40% of India’s food and vegetables spolis before reaching market.

3. Not many industrial houses have looked at this sector as an opportunity and hence lack on investment in pvt. sector capital investment —-resulting into (2)

4. 96 % of the retail stores are run by 12 million families and hence even if one makes investments in the infrastructure and reduces the waste, will the investor (industry house ) be able to compete with the price, convenience, flexibility and agility provided locally by these family run stores?

5. Is Indian consumer ready to pay for that stamp of quality from supermarket/branded retail store?

Before you think it is a distant dream to consider Indian Farming as a candidate Export Industry, let us be reminded that-

i. India has largest arable land.

ii. 65% of cropped area is ‘Organic by default’ and hence well positioned to eye the $26 bn market of Organic Food.

iii. Bharti Mittal has a partnership with Rothschilds and the partnership has invested as much as $50 mn on global distribution of freash agri products.

iv. Gautam thapar has emerged as one of worlds top 10 gherkin producers.

v. The latest one…Reliance has announced plans to set up 1600 farm-supply hubs in India. These hubs should help them connect farm with retail chains to be built in India. They will also be helpful as centers to put a ‘export quality’ stamp on produce that is ready to take the flight!

Now, let me go back to my 5 reasons and present the antithesis-

5. Yes. Indian consumer is more than ever ready to spend that extra rupee in getting that quality stamp from branded retail.

4. India’s 96% family-owned stores looks very large as compared to Newsweek report [dt July17, 2006] of 80% in China and 60% in Thailand.
3. India’s industry heavyweigths like Bharti (airtel fame) and Reliance have deep pockets and strong belief in risk-reward to take the first step.

2. Investments by Bharati, Reliance and others joining the club will be able to bring in economies of scale and reduce the value of fresh food basket by reducing the 40% waste.

1. Kamalnath’s efforts in WTO and increasing shift of balance of power towards India should help in getting entry into markets with 50 million consumer while letting them enter worlds second largest (emerging) market

While today these are weak signals on both farming and retail and hence more so on ‘Farm to Retail’ plans of likes of Reliance, one wont be surprised if this industry does wonders to Indian Farmers that IT industry did to Technology graduates with the offshoring boom.

Space to watch!

Some Relevant Links:

http://msnbc.msn.com/id/13773309/site/newsweek/

http://www.forbes.com/home/feeds/afx/2006/07/11/afx2869655.html

http://www.ibef.org/economy/agriculture.aspx