3 March 2011
S Venkatraman , Food & Agribusiness Research and Advisory Rabo Rab o Indi India a Financ Finance e ltd ltd
S t r i ct l y p r i v a t e & c o n f i d e n t i a l – f o r d i s c u s si o n p u r p o s e s o n l y
This presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefin fing provided by Rabo India Finance Ltd (Rabo) / subsidiaries . may be used for any other purpose without the prior written consent of Rabo and Rabobank. The information in this presentation reflects prevailing conditions and our views as of this date, all o which are accordingly subject to change. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or was otherwise reviewed by us. In addition, our analyses are not and do not purport to be appraisals of the assets, stock, or business of the company under analysis.
2
Increasing trend in fruit production • Accounts
for 10 per
Fruit production trend in India (million tonnes)
cent of world’s total fruit production
70 60
•
n a s
e wor
s
50
largest producer of
40
bananas and
30
mangoes
20
―39% of the world’s
― 23% of world’s
10
2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0 1 ‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0
banana production Source: NHB
Fruit production is increasing at 6% p.a. for the last 6 years 3
Mango and Banana account for 60% of FRUITS
Area (‘000 ha)
Production (‘000 tons)
Share in total production .
Mango
2357
13557
18.4%
Citrus
961
9452
12.9%
Papaya
103
3912
5.3%
Guava
216
3225
4.4%
Apple
279
1795
2.4%
86
1420
1.9%
Sapota
162
1358
1.8%
Gra es
107
925
1.3%
Pomegranate
128
829
1.1%
74
492
0.7%
Pineapple
Litchi ers Total 4
. 6478
Source: National Horticulture Board, 2009-10 data
73526
100%
High growth in vegetable production Second largest
Vegetable production trend in India (million tonnes)
roducer after China Ranks
140
―1 in peas and
120
o ra;
―2 onions, cauliflower & cabbage;
―3 in potatoes ―
n tomatoes
80 60
20 0 2 ‐
3 ‐
4 ‐
5 ‐
6 ‐
7 ‐
8 ‐
9 ‐
0 ‐
1 ‐
2 ‐
3 ‐
4 ‐
6 ‐
7 ‐
8 ‐
9 ‐
0 ‐
1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0
Source: NHB
Vegetable production is increasing at 4% p.a. for the last 5years
5
5 ‐
Potato and Onion take dominant share Area (000 ha)
Production (000 tons)
Share in total production
Potato
1825
36410
27%
Onion
755
12213
9%
Tomato
633
12425
9%
Brinjal
589
10163
8%
Cabbage
328
7245
5%
Cauliflower
337
6403
5%
Okra
451
4797
4%
Peas
362
3011
2%
Tapioca
232
8060
6%
Sweet Potato
119
1095
1%
Others
2332
31724
24%
Total
7964
133545
100%
Vegetables
Source: NHB
6
Diverse production regions & seasonality
Vegetables Fruits
7
Diverse production regions & seasonality
Indian fruit and vegetable production is distributed over diverse agro climatic conditions across different states.
Large variation in seasonality for fruits ―further accentuated as storage facilities are both expensive and rare
Price volatility is high due to seasonality
Comparative advantage in production and export ―Mango, Banana, Grapes, Papaya and Guava ―
8
,
,
Long supply chain with significant value loss
•
Fragmented holdings
•
High intermediation
•
Lacks scale & cost efficiency
•
Poor productivity
•
High margin build up
•
High cost of Aggregation
•
Old Cultivars
•
Low investment
•
Low backend infrastructure
•
Low technology
•
Highly unorganised
•
Low levels of processing
•
Price volatility
•
• •
9
Post harvest practice
•
Lack of infrastructure
Huge opportunity to focus on back end sourcin of fresh roduce
10
Global practices
11
Strong growth in demand Income and population growth in selected countries •
population in India as the
) 1 1 6 0 ( n i t a l u p o p R G A C
key driver • Per capita consumption
expenditure of F&V has increased by 8-9% per year in the last 12 years • Organised retail industry in Income growth (‘09) Size of bubble = 2008 population
ource:
12
,
,
a o an
12-15% • Organised retailing of Fresh
F&V is about 1 mn tonnes
Initiatives in backward linkages in learning hase
13
•
Initiatives in direct procurement from farmers through contract farming
•
Offers assured market financial assistance a ronomic su
•
Multiple sources in the initial phase -directly farmers, APMC markets etc
ort
Opportunity –Productivity improvement India
World average
Apple
6.5 to 7.5
13-14
Plums
1.27
4
2
11
0.9
7
2
5
8.75
na
9
17
11
17
Product
Peaches/Nectarines Apricot Cherries Papaya Oranges Onion Source: Rabobank research
14
Apple production centred largely in Northern India J&K
Uttarakhand
Arunachal Pradesh
• Varieties
grown
are mainly Red Delicious
•
pp e season n India is end July to Mid December & to November
15
Low productivity is the primary concern •
Production in 2010-11 is
300
Area, Production of Apple in India
2500
estimated at 2 to 2.2 mn 2000
tonnes •
Productivity has been in .
.
tonnes/ ha against a world average of 13.6 •
Monoculture of a few old
200 1500
a r A
150 1000 100 500
50
cultivars (older than 30 years) •
0
0
Absence of post harvest protocols & training leads
Area (In ' 000 HA) Production (in ' 000 MT) Source: NHB
Varietal and productivity improvement is to be addressed 16
n o i c u d o r P
Long distant points of consumption •
Average acreage for apple orchards is .
•
Packed in wooden boxes carrying 18 kgs each
•
Paddy straw is used in the box to reduce damage ,
•
storage and transport increase wastage •
Transportation mainly at ambient temperatures
•
CA facility is limited - only 30000 tonnes < 1.5% of roduction but growing
17
Significant domestic demand •
One of the most expensive fruits
•
Though apple is highly price elastic, the customer preference is for
―Red colour ―Sweet taste ― ―Uniformity in shape and size
•
Retail Prices: Imported apples are usually available at 2-2.5 times
18
China and USA have equal share in apple im orts 150
Source of imported apples
Apple imports('000 tonnes)
9%
1% 6%
100 42%
50 42%
USA
China
Chile
Australia
Others
Source: Commerce ministry, Government of India
•
Varieties -Red Delicious, Fuji, Royal Galla, Granny Smith, Golden Delicious,
•
19
•
Value of apple imports for 09-10 is USD 92 mn
•
In Q1 of 2010-11 (Apr-June), 71000 tonnes of apples were imported
•
Dec- July is Seasonal window for apples
High margin cost in import marketing Description Import unit price, CIF (Washington apples)
USD per box of 20 kg 25.0
(Tariff (50%), Clearing, Freight Commission of agent) Importer's margin
17.1
Realization at wholesale market
45.4
,
Expenses of trader (Transportation, Cold Storage (15 days avg), Commission) Wholesale trader's margin Retailer’s urchase rice
3.3
1.1 2.2 48.7
Retailer's expenses Carriage/Handling, Transportation, Wastages, Others
4.4
Retail margins
8.9 .
Source: Rabobank research
Over 50% of consumer price is channel margins without any value addition 20
Impact of imports on Indian market
21
Impact of imports on Indian market
22
Impact of imports on Indian market
23
Impact of imports on Indian market
24
Impact of imports on Indian market
25
Impact of imports on Indian market
26
Pear is a fast growing fruit
•
Small production volumes at about 200000 Tonnes
•
Current volume of imports
is c.10000 tonnes
with a CAGR of 25% over
the last five years •
Pear imports are mainly from China (45%), US (35%) , South Africa (20%)
•
Varieties of pears are mainly Anjou (USA), Shandong (China) and Packhams (South Africa)
• 27
Import duty is 31% for pears
Opportunities aplenty • Productivit im rovement
Production
Supply Chain management
• Varietal improvement • High Density Planting
• Cold chain logistics • Controlled atmosphere storage
• Imports
Marketing
• Partnerships for domestic retail business • Sourcing base for exports
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Rabobank : Global Financial Powerhouse Rabobank is recognised internationally for its unique specialisation and expertise in the Food and Agribusiness space. About Rabo India •
100% subsidiary of Rabobank International
presence in India
•
Offices in Mumbai, Delhi & Bangalore
•
Rabo India Finance Ltd.
•
Incorporated as a non-bank Finance Company
•
Rabo India Securities Pvt.
•
AAA rated by CRISIL (S&P affiliate)
•
Subsidiary Rabo India Securities is a SEBI
•
Rabobank Foundation
re istered Cate or I Merchant Banker
•
Canara Robeco Asset
•
.
Management Company Ltd
Strong sectoral focus with ‘On the ground’ knowhow • Strong relationships : domestic, MNCs, Govt bodies • Access to international network
29
Rabobank Group
•
India Agri Business fund
•
Sarasin Alpen India Pvt. Ltd
Rabo India -
30