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India: SCS Group provides solution for agri- business

An interview with Sumit Saran, director of the SCS Group, an agribusiness consulting firm specializing in marketing, international trade and communications strategy related to food, beverage and agricultural products. The SCS Group has been a pioneer in nutrition based marketing in India which works with private firms, commodity groups and government agencies to create a market for high value food products in India. It represents Fresh California Grapes, Washington Apples, USA Pears, USA Apples and California Prunes, among others, in India.
 
Fresh Plaza (FP): Can you please provide an overview of SCS Group?

Sumit Saran (SS): The SCS Group is an agribusiness consulting firm specializing in marketing, international trade and communications strategy and offer services related to food, beverage and agricultural products.

The firm helps international companies and agencies set up and implement market entry and sustainability strategies which the emphasis is on defining a long term strategy for the market, identifying the constraints that are present in the market and designing activities accordingly to meet those constraints.

SCS Group shares vision and plans with the importers, institutional or food service distributors and the retailers in every season. We get their feedback, design and implement strategies, evaluate the result and make changes if required.

FP: How would you summarize the market situation for imported fruits in India?

SS: India is a large producer of fruits and vegetables. In fact, it is second only to China in terms of horticulture production. The country was a closed market till last couple of years of the last century and the market for most imported fruits and vegetables opened only after 1999. In that sense, we are a very new market but the category of imported fresh produce, especially fruits is growing very fast. Consumers are beginning to get a taste of what the world has to offer.

India’s import of fresh fruits was valued at US$ 272.86 million in 2009-10, with an increase of 26.78% over the previous year. Fruit imports in India have witnessed a steady growth in the last 5 years owing to sustained demand from both the consumers as well as the HRI sector.

Growth drivers for imported fruits are – increased disposable income, growing interest towards premium food categories substantial growth in health awareness among Indian consumers, mega events and parties in metropolitan, and relaxation in trade policies.

In the last 5 years, the United States has been the largest exporter of fresh fruits to India with its varieties of apple and pear categories having the largest share. China, Chile, New Zealand and Australia are the other major fresh fruit exporters to India.

FP: What are the main reasons for this growth? How do you foresee the growth in the near future?

SS: The key driver for the development of the imported food segment in India is the modern Indian consumer. In very simple language - Indians are eating more; Indians are shopping more; Indians are spending more and consequently Indians are demanding more. 

From a food marketing perspective, these seemingly extremely straight forward and simple statements have huge ramifications.

The growth of imported fruits in India in some ways has mirrored the overall prosperity in Indian economy, which has continued to boom despite the overall global slow down.

The growing Indian economy combined with the media revolution has meant that more Indians are aware of global consumption patterns and trends. Their aspirations towards a better and healthier life are bringing about fundamental changes in food consumption patterns.

The Indian consumer today is not only exposed to the world but is also ready to spend that extra buck for buying foods that are nutritious and of superior quality.

Where traditional markets of North America and Western Europe are stagnating, the impetus for growth is coming from the developing economies such as India’s and this is a trend that is most certainly going to continue in the near to long term future.

In that sense India is a classic growth market at present. Tremendous growth rates can be seen in products that can sustain themselves comparatively better in non refrigerated environments like apples, pears and oranges. Import volume of very temperature sensitive products like fresh grapes, stone fruits (peaches, plums and nectarines), etc. is also growing as modern retail establishes its footprints and gradually creates the necessary infrastructure for these fruits.

As far as the future is concerned, it is extremely bright. The growth we are seeing currently is still only the tip of the iceberg. The infrastructure challenge in India confines the opportunities for imported fresh produce to only the more prosperous areas of India. There are tremendous opportunities in the small and medium cities of India. The real growth in the market will come, when importers and retailers are able to reach the consumers across the country.

FP: What is the size of the market according to you, for imported foods in India?

SS: In my opinion, when we look at imported foods, we should be looking in two distinct categories, that of supplementary and complementary foods.

Supplementary foods are those that our country needs to import to meet the demands of a one billion plus population. Products like cereals, pulses, edible oil and sugar fall in this category. Complementary foods are those that are imported to cater to the demands of a burgeoning Indian middle class and its aspirations to be a part of the global consuming family.

According to various trade reports and analysis, market size for imported food products in India for complementary foods that excludes the essential bulk import items like cereal grains, edible oil, pulses etc. is estimated to be close to US$ 1.5 billion.  Fresh fruits, dry fruits and nuts, certain type of oils like olive oil and processed foods like confectionery items, beverages and pasta products etc. are the fastest growing import items in this category.

FP: As per your experience, what categories of imported foods find takers in India?

SS: India is a huge market with varied tastes and patterns. If marketed and promoted properly, there is tremendous potential for foods across categories. Naturally some categories will be faster growing than the others but opportunities exist across the board. What is important for the global food marketers is to spend time and effort in understanding the market and the target consumer base and then launch their products accordingly.

FP: Do you think that imported foods can be a threat to domestic food items?

SS: I do not think we should look at imported foods as a competitor to domestic foods. In fact as I mentioned earlier, imported foods are complementary in nature. In many cases, they have not only helped increase the market for domestic foods but also at times resulted in better returns to Indian producers and growers.

India is a market that provides ample opportunities for coexistence and mutual growth. Indian consumer to me is one of the most underserved consumers in the world. Look at what the Indian upper middle and middle class can afford and what choices it is being given. With processing levels at less than 2%, the fact remains that all of Indian food industry put together is having tough time getting the SKUs to fill a 6,500 sq. feet grocery store. Hence, there is no question of competition. As we say – in India, it is still not about the piece of the pie, it is about the size of the pie.

Earlier in the nineties, when India lifted its import restrictions from most of the food items, market for imported food items was treated in line with the luxury items. The consumers who bought these products were mostly the elite class with high incomes and retailers of these products were few. However, things are drastically changing as affluence becomes more widespread in India. High disposable income in a comparatively young consuming population base that is aware of global food patterns because of media and Internet provides the ideal platform to launch and sell complementary foods.

However, suppliers must spend time and effort in researching the market and understanding the target consumer base. Only then they can define correct promotion strategies. India to me is a tough but a very rewarding market. This is if you have done your homework and if you are prepared to work with the various stakeholders over a period of three to five years.

FP: What is the impact of organized retail on the trade and consumption of imported fruits?

SS: The retail infrastructure for fresh produce in India at present is quite poor. Most of the sales still happen from wet markets and small street side vendors. However, the retail landscape in India is undergoing a revolution and a number of large Indian companies are setting up organized retail chains and new supermarkets can be seen across the country. The smaller and medium cities are now getting the first imprints of modern retailing and the entire landscape will be redefined in a few years.

However, if we look at the present, organized retailing in India is still in its infancy. Overall, the total sales of fresh produce through the modern retailers will be less than 5%. In case of high value imported, the percentage may go up slightly higher, but the fact remains that at present, the small shop owners and the roadside vendors play a critical role in distribution of fresh produce.

Organized retailers will eventually offer the best potential for the sale of imported fresh produce due to their improved infrastructure and distribution systems. The organized retailers forecast that fresh produce retail through organized formats have the highest growth possibility once the cold chain and other infrastructure falls in place.

FP: What improvements do you foresee in infrastructure and supply chain issues of fresh fruit & vegetables as a result of growth in the organized retail sector?

SS: India continues to grapple with the lack of infrastructure especially cold chain network for fresh produce. However, first signs of change are getting slightly more visible. The supply chain invigoration by leading conglomerates will need some time to deliver tangible results.

FP: What kinds of challenges are faced by major conglomerates in terms of handling and retailing fresh produce?

SS: The American football mantra that “Championships are won in the off season,” applies completely to the Indian fresh produce retail endeavors. It is easy to create the front end for fresh produce, the trick lies at the backend.

Hence the question of how to tie the loose ends at the farm level is what is pegging people down. I feel that most retailers disregarded the extent of this challenge. Lack of trained manpower who understood fresh produce business also impacted a number of retailers.

I envisage that we will see an increase in space allocation for fresh produce by these stores once they start to grip a firm hand on the hitherto fragmented supply chain..

FP: How can foreign companies best tap into the new opportunities that are emerging in the Indian fresh produce market and what is the best route to expansion?

SS: There are no formulas for instant success in India. Companies will need to do their ground work and enter this market with a clear long term vision to have any chance of success. The market is extremely rewarding for those who can persevere.

The SCS Group simple mantra for success in India is – Enter, Establish and Persevere

 
Contact details:
 
Sumit Saran
The SCS Group
Tel: 0091 124 434-45 00
www.scs-group.com

Publication date: 6/7/2011


 


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