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Fruits & vegetables processing- A traverse through the Covid-19
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Tuesday, 12 January, 2021, 12 : 00 PM [IST]
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Mihir Mohanta
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The fruits and vegetables processing industry comprises of Pulp, Frozen, and Potato Chips and Dehydrates segments. These together process around 2 per cent of the total Fruits and Vegetable production (roughly300MMT). By and large it is a B2B (Business to Business) industry. The raw material used is high on perishability, so also it has high manpower engagement.
These are also marred by low-capacity utilisation (around 40 per cent). The industry faces the problem of meagre domestic demand on the back of consumer’s food habits as they spent a little on the processed fruits andvegetables. On the export front, these faces stiff competition from countries like China, Turkey and Brazil,which compete for aslice of share of the EU(European Union) markets.
This weak industry was challenged with most formidable obstacles of Covid-19. It had a tough time from bothdemand as well as the supply side. But it survived through the rough phase and has bounced back on to the normal track. However, their survivals were not easy, as each segment had to find their way out of the unknown and the uncharted Covid-19 territory. It is interesting to see their bounce back stories.
a) Pulp:The estimated size of the Pulp segment is about 4.1 lakh MT valued at Rs 2000 crore. It is growing at a CAGR of 5 per cent over last 5 years. 80 per cent of the processing comprises of mango and rest 20 per cent is shared among tomato, papaya, guava, amla etc. Chittoor in AP is the major mango processing hub, which houses about 55 small and large processors, who processes around 2000-2500MT of mango per day during the season. The 2nd hub is around Nasik.
The Alphanso processing was just about to start when the lockdown was declared on March 25, 2020. With lockdown on, the migratory (skilled and semi-skilled) labour could not reach to the processing sites. There was much confusion on the various directives issued by the authorities. By the time there were some clarity, the short processing window of 1 month elapsed. Despite the constraints, the totapurimango processing followed. On the demand front, the distribution networks broke down, customers stopped going out, and there was ‘Corona’ fear in cold beverages. The summer witnessed a cold demand. The beverage marketeersand retailers were left with huge inventories and they could provide no clue on future demand visibility. It resulted in lower processed volume, about 40-50 per cent of Alphanso and 60-70 per cent ofTotapuri. Tomato processing ofpulp never took up as the prices remainedhigh (>Rs50/-)for the most part of the year. However, the silver lining wasAmla. The Amla pulp requirement surged past 10X on the back of the immunity driven demand. Even the Pisti demand got converted into Pulp.
b) Frozen IQF: The Frozen segment consists of 3 major products, which are Green Peas; Sweet Corn andPotato based French-friesandSnacks.
RudrapurandKashipur beltis the hub of the Peas processing with 38 of total 65 plants around. The estimated size of the Industry is about 1.5Lakh MT of frozen peas, with a value of about 1200crore. The processing season is once a year during January- March. By the time lock down started, the processing was almost over. But the cost per kg of the frozen peas this year was about 60 per cent higher than a normal year. On the sales side, if you analyse the pattern, 70 per cent of the demand is for bulk and balance 30 per centofretail sales.
Bulk market demand is largely from out ofmarriages, hotels, restaurants and canteens. The lockdown prevented marriage and other gatherings. During the lockdown, the cold chain distribution network also broke down. The main sufferers in this case were the SME’s. However, the large, organised players who quickly restored their distribution network benefited out of the retail sale. But the retail sale could not compensate for the whole of the missed bulksale. As a result of this the industry was left with high cost carried forward inventory. Therefore, the expected farmer’s realization from out of green peas in the current year will remain depressed.
Pune with about 25 processors is the hub of Sweet Corn. It has a volume of about 50 thousand MT and a market size of about 300crore. The major sales channel in this case is retail. It witnessed a growth of about 20-25 per cent, primarily driven by home consumptions.
French-fries have a volume in the range of 50-60 thousand MT per annum with an estimated market size of about 500-600Cr and a potato requirement of around 2Lakh MT.Mehsana near Ahmedabad in Gujrat is the emerging hub for French-fries. The industry processes throughout the year out of the stored potato sourced from contract farming. During the Q1, because of the lockdown, they lost capacity as a result; they had to off-load the corresponding quantities in the retail market. It has 2 channels of distribution, i.e.about 75 per cent in bulk and25 per cent in retail. During the lockdown, theHoReCa demand in the bulk salewas very little. However, the retail sales demand grew by about 25 per centon the back ofenhanced home consumption.
c) Potato Chips: The Potato Chips, which is an ambient packaged snack is estimated to be the volume of 3.75- 4Lakh MT. As per Euro monitor, the size of Indian chip market is about Rs7,000 to 7,500 crores. The quantum of Potato equivalent for processing is in the range of 13- 15Lakh MT against the total potato production of about 50Million MT. The industry was affected both on production and distribution during the first month of the lockdown. Subsequently, it was normalised, and registered a sales growth of about 8 to 10 per cent as against last year.
d) Dehydrates: Dehydrated industry comprises of about 175 SME’s who processes onion and garlic. Almost 85 per cent of these are in Gujrat. Rest 15 per cent plants are shared with MP, Maharashtra and Rajasthan. Mahua a small town near Bhavnagar is the hub of dehydration. The industry processes about 75000MT of dehydrated onion. The equivalent raw onion required to process this is just 7.5Lakh MT against a total production of about 21.8 Million MT. 70 per cent of this is white onion, which is preferred for exports to West Asia, Europe, and the South-East Asian nations. Domestic demand of dehydrated products is about 25-30 per cent.
e) At the time of the lockdown the industry was in the mid of the processing season (January-May). The processing plants were shut for about 15days, but soon they restarted with permission from the local governments. The exports in the sea routes continued. Most destination countries allowed the acceptance of E- documents. Indian government too switched over to on-line documentation. In the absence of the couriers, it was of great benefit to the industry. Overall industry could export about 80 per cent of the last year volume. But because price realisation was good, the industry could maintain the turnover value.
Despite the difficulty, thefruits andvegetables processing Industry survived the onslaught of the Covid-19. As because the food is basic to human life, lock down impacts could be absorbed. Unlike non-food, which were badly affected. Although small, we must appreciate the resilience of the industry.
(The author is general manager, supply chain- Mother Dairy, Noida)
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