Sannam S4 is doing increasingly levels of work in the Food and Agri space in India, now with a strong and dedicated team to support it. On a recent trip to India with a client, we met with various bodies in the industry (food retailers, distributors, government etc.) and thought that it might be useful to share a few observations:
- Food export from UK to India – the recent past has set the wrong tone in the UK industry
The UK Food and Drink industry is exceptionally strong. As such, it is not a surprise that it looks to major export markets for opportunity. In the context of India, this journey has had the odd bump in the road (this actually applies to companies from all around the world working with India); but in this case, don’t use past performance to predict the future.
A few years ago, the Indian food regulator, FSSAI, made some changes that caused major issues to both Indian importers and foreign exporters, ultimately resulting in the product being stuck in customs. The reality is that this caused some exporters to pull out and some Indian importers to stop importing. Fingers (including some very big brands) were burnt. However, in the context of a reforming government, these issues have now been largely navigated and interest levels return. It’s important that UK exporters are operating with the latest facts; something we are planning on working with a UK industry association to actively address. If we don’t, we get left behind.
2. Food export from UK to India – where to focus?
Regulatory matters aside, there is then the important question of what types of products/brands will work in India? For long-term success, with the possible exception of some premium products, the ideal combination is a strong brand, an attractive price point, a product that works well with the Indian palate (or can be adapted to do so), with an adequately long shelf life and with an organisation behind it that is prepared to invest in developing the brand. In my mind, unless you are a very premium product, an acceptance that local manufacturing may be required in the long term is also a factor; without this, hitting the price points necessary is going to be challenging.
There are some particular product categories that came through with particular levels of interest. More on that in due course!
3. “Own brand” – hard work
As the ‘organised’ food sector matures, Indian retailers are exploring ‘own-brand’ products to help drive margins and brand strength. However, the historic lack of investment in food production is making this hard work, with quality levels proving difficult to maintain. How can foreign players play a role here? See the next item!
4. Food processing – an area of focus for India
Estimates are that only 10% of food produced in India is processed. This is just one contributing factor to huge levels of food wastage. To tackle this problem presents challenges (and therefore opportunities) throughout the food supply chain.
The Indian government has recognised this and is putting on an event in early November 2017 called World Food India. Being held in the heart of New Delhi, India is rolling out the red carpet to attract the world to help build India build out its food processing landscape. This covers many and varied areas and should be of interest to food processors, technology and equipment manufacturers and suppliers, logistics players, cold chain operators etc.
To illustrate the breadth of opportunity, we have been working on an innovative programme with our partner firm Larive in how to tackle food wastage. This brings together players from across the supply chain (a consortium of best in organisations) with the aim of proving that by deploying advanced techniques, knowledge and skills that food wastage can be dramatically reduced.
Sannam S4 will be very actively supporting a visiting delegation to World Food India so if you are interested in participating please let me know (www.worldfoodindia.in).
5. GST – good, bad and (no) ugly.
The introduction of single goods and service tax in India represents a seismic change. This change went into effect on 1st July 2017 and organisations are now working through the operational realities of this; exactly where Sannam S4 focuses its support.
In reality, the roll-out is a little bumpy but that is inevitable in a change of this magnitude. It is driving discipline into supply chains but if you have suppliers not yet registered for GST, things are problematic. The need to register for GST across all the states that you operate in is also a source of frustration. I am hopeful that things will be refined to reduce friction.
On the positive side, and lets focus here primarily, the overarching view on the ground is that it is a positive development:
- Online submissions – have dramatically improved the ability for organisations to complete their submissions and, where applicable, receive monies back (as a result of netting off GST inputs and outputs). While not completely without friction, this is now taking place in a matter of days, not months which delivers a real gain in the pocket for many organisations.
- Data – for those that have worked in India before, you often hear about the ‘organised’ and ‘unorganised’ sectors, with the unorganised sector often being larger than the organised sector. Estimates on the unorganised sector were exactly that due to a lack of hard data. GST requires all organisations to be registered for GST and, as such, for the first time, we are going to start to get a view on the scale and dynamics of the unorganised sector.
With the fundamentals of needing to feed nearly 1.3bn people, high levels of food wastage, increasing awareness on food safety matters, the increasing footprint of modern retail and associated food format and the desire for innovation in food, this is going to be an exciting sector to support over the coming years; there are some very substantial changes ahead.
The article is written by Edward Dixon, Group COO & Managing Director.