IG international (IGI) is India’s largest fresh produce handler, close to 80,000 tonnes annually, in both imports and exports. To support its operations, IGI has its own reefer trucks in all sizes; the second largest cold chain network in India, and has consistently invested in the business.
A significant boost to the fresh produce business was the liberalization, in 1999, when the country opened to fresh produce imports. As a result, people learnt the best practices from countries like the U.S., Australia, New Zealand and other developed countries. This opening up was critical across the value chain. For example, thirty years ago, a 20 kilo box of apples would yield the farmer anywhere between INR 200 to 600, depending on the arrivals in the market. Cold chains were not so well developed, so the excess could not be stored for later release. As markets opened up, growers also realised that they could obtain much higher prices. Today, a similar box yields INR 2500. Producers have also changed; some of them have switched from the old wooden boxes to corrugated boxes. Best practices from overseas are slowly being adopted in India.
However, there are significant challenges, the foremost being the overwhelming presence of middlemen in the value chain. When there are too many individual entities playing independent roles, it is difficult to bring in standardisation in the services. Standardisation has to start from the farm itself. The produce has to be moved from the farm to the pack house. Today we do not have pack houses, which means the packing has to be done on the farm. Even here, there is no standardisation. Farmers pack in different sizes – 2 kg, 10Kg, 20 Kg, in wooden crates, corrugated boxes- there are too many variables at work here. Compare this to the situation in the U.S. In the U.S., the produce is moved to the pack house, where it is pre-cooled, sent to the packing line and then boxed. The produce then has to move from the pack house to the market and further on to the shelves in refrigerated trucks. Moreover, everything is tested for residue levels, as per FSSAI norms. It is time we extend this to domestic produce, too.
We need to compare this with the domestic scenario. There are no pack houses and no pre-coolers. We tend to overload the trucks; a 20 footer which can hold 14 tonnes will be stuffed with 20 tonnes, and without refrigeration. When this produce reaches the market, it will be re-packed. This leads to the wastage we talked about. And unfortunately, the grower pays for this wastage through lower prices.
A major reason why producers do not invest in pre-coolers is the small size of the farm, of a couple of acres per grower. This makes any such investment expensive. However, there is one experiment we have not looked at in India: the cooperative. If producers pool their farms, we will have the size advantage. Assuming we have 1000 farms of one acre each, we can have the benefit of a 1000 acre farm cooperative. We can compare Bolzano, in Italy, to Kinnaur, in Himachal Pradesh. Bolzano is a mountainous city, and hence the farm size is small, but they have formed a one of the world’s largest cooperatives. They have just one pre-sorter, where the produce is put in water and sent across the sorting line to be put into bins based on size, colour and other features. And the time lapsing from farm to the bin is less than six hours. That is how you preserve and improve the product’s shelf life. Again in the U.S., it takes less than two hours to pre-cool a product. In India we take 24 hours. This is where we really need to improve.
Cooperatives may not be the best way ahead for us in India. It is very difficult to organise growers into a cooperative. The model followed by most players in India is different. A trader approaches a producer and offers him a deal based on the existing information. The grower will get that amount, regardless of the actual produce. The risk, in this case, is borne by the trader. IGI is trying to introduce a change in the system, investing in technology to make a difference. IGI has invested in a packing line, to ensure that it is not buying the wrong product. IGI is proposing a model where the grower will be paid as per the produce offered. The packing line and sorter will automatically sort the produce based on aspects such as colour and size and the producer will be paid accordingly.
Moving Beyond
Five years ago, IGI was focused on importing fresh produce into India, but the currency depreciation forced a change in direction, as imports expose companies to currency risks. To mitigate this, IGI has been deeply oriented towards exports for the past four years. IGI is one of the top ten exporters of fresh produce. Apart from this, IGI is also involved in the domestic produce of citrus, apples, etc.
To keep up with its vision of becoming India’s leading fresh produce firm, IGI is looking at acquisitions outside India. IGI is looking at a greenhouse firm in Canada, and has invested in cherry farms; this is a form of diversification for IGI which will help reduce risks by expanding geographically, although India will continue to be the core for IGI’s growth. The investments in other countries will give IGI access to best practices, which it would then like to adapt for India. With this in mind, IGI is looking at further investments.
As a part of better asset utilization, IGI is now foraying into the domestic fresh produce sales too. Until now, IGI was shipping its imported produce from Mumbai to Delhi by road, and the trucks were coming back empty. Today, with the setting up of four facilities in Himachal, the return leg is also productive.
With a few smart moves, IGI is poised to usher in the best practices in the Farm to Fork supply chain in India. And in the bargain, reduce problems for the growers, by ensuring pricing commensurate with the quality of produce.
For more information:
IG International
Tarun Arora
Tel: +91-22-66272000
Mob: +91-9819248884
Fax: +91-22-66272084
tarunarora@iginternational.net
www.iginternational.net
Tel: +91-22-66272000
Mob: +91-9819248884
Fax: +91-22-66272084
tarunarora@iginternational.net
www.iginternational.net