FNB News - “Prices of all imported products have seen hikes”

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INTERVIEW

“Prices of all imported products have seen hikes”

Monday, 13 January, 2014, 08 : 00 AM [IST]

The Mumbai-based Chenab Impex Pvt. Ltd, a leading food importer, has been importing a range of products (from cereals to chocolates to cheese accompaniments to nuts and oils) since 2002. Although it has carved its niche, it continues to face several obstacles in the current scenario of inflation. In an interaction with Harcha Bhaskar, Anil Chandhok, the company’s director and owner, shares his views on the current market, and how the situation has made both importers and consumers price-conscious. Excerpts:

What are the various products imported by you, and from which countries?
We import various products like chocolates, olive oil, frozen sea food, meat, sauces (tomato and mustard) and biscuits. The products are sourced from their countries of origin.

For instance, chocolates are imported from Italy, sauces from the United Kingdom and France, olives from Greece, France, Spain and California, and biscuits and cookies from the United Kingdom, France and Italy.

What is the impact of inflation on imported products?
The prices of imported goods have shot up to 25 per cent. The rupee has depreciated in terms of current foreign value exchange. For instance, one Euro was worth Rs 67 yesterday, and today it is equivalent to Rs 85.

Consequently, there is also an increase in the maximum retail price (MRP) of the products. So basically, it is the consumer who would be bearing the brunt of inflation.

Also, to some extent, even the importer faces difficulties and experiences losses in the recent trade. The losses are incurred on both old and new import orders.

How do traders face losses?
The prices suddenly rose between May and August. There is an increase in the difference between the exchange rates of the products. Thus, three or four importers incurred an unexpected loss.

For example, when import orders were given, the value of the products, as printed in the bill, was Rs 200, but when they were received by the traders at the port, the value of the product had increased to Rs 225.

Which are the major ingredients that have gone through increases in price?
The prices of all imported products have witnessed hikes.

What are the various factors causing inflation?
For importers like me, the factors that affect the MRP of the product are as follows:

Current value of the rupee
The value of the rupee is depreciating in the foreign market. Because of this, there is an increase in the exchange rate of the product.

FSSAI’s stringent norms
There are stringent rules laid down by the Food Safety and Standards Authority of India (FSSAI). At the port itself, the goods are held by FSSAI for scrutiny. These may later be rejected owing to petty issues related to labelling.

When rejected, the supply is stopped again. The order has to be placed, and the products would take a few months to reach the market again. Meanwhile, the consumer has no choice but to buy the available products or alternatives whose prices have already scaled up.

These goods are kept at the port for the 100 per cent product sampling, which means taking one product from the whole consignment for the testing. Here too, the testing fee for the consignment and costs of damaged products would be incurred by the importer.

The consignment is kept at the port for almost 6-10 days. Sometimes, there is damaged to the good that are temperature-sensitive. Such instances take place mostly during the festive season (between Diwali and Christmas).

Failure in agriculture commodity overseas due to weather
Because of bad weather in the country, the crops get affected or destroyed, and there is an increase in the price of product. In such a situation, there were increases in the prices of products from every country, owing to the shortage of the product in the market.

What are the prevalent organic food trends in India? What are the perceptions overseas about organic foods from India, and in the case of negative ones, how do you clear the same?
The consumption of organic foods is India has grown. Though compared to foreign countries, the Indian organic food market is still growing at slower pace.

But from the regulatory point of view, organic food is not a different category, and there are no specific regulations for the same. Organic foods are imported in the same manner as other food items.

Who are the major clients you supply your products to?
Our products sell throughout India. And our customers include the luxury five-star hotels, fine dining restaurants, gourmet stores, and modern and traditional retailers.

Our current clients from are luxury hospitality chains like the Taj, Oberoi, the Hyatt and the Leela; retailers like Godrej Nature’s Basket, Food Hall, Spencer’s and Hypercity.

Will there be an impact (or change in consumption pattern) of it on the food processing, hotel and restaurant and other multi-national corporation (MNC) sectors?
I cannot specifically answer this question, but yes, household consumers and chefs may either opt for alternative products which are cheaper in rate comparatively, or may using it.

But it has been seen that many retail food supermarkets are shutting shop. What could be the possible reason behind it?
The location, staff, rent and maintenance costs would be the primary reasons, as it is difficult to shell out high amounts for rent and maintenance when there are fewer footfalls.

Also comparatively, the margin of profit they earn on the products is very less.

What are the current trends noticed by you in regard to new products in the market or consumer preferences?
As an importer, as I can see there is acceptance and preference given to gluten-free products. There is a cereal called quinoa from South America, which is known as the healthiest food till date. It is entering the Indian market. It has a healthy amount of manganese, which no other daily food has. Because of its health perspective, quinoa is popularly known as a wonder crop. Lamb meat from New Zealand is also gaining lot of attention from consumer.

Although many new things can come to India, it is difficult to enter the Indian market, due to stringent norms.

The rules in India are 50 years old and outdated compared to other countries, which are constantly researching and updating their rules and progressing.

According to you, when is the situation of inflation expected to recover, and what are the steps that the government should undertake to control food inflation?
Nobody can say that. However, the situation would be the same for about a year. Currently, the government functioning is not good. There is no balance between the imports and exports of the country.

The stability of the market mostly depends on the demand and supply. As business consumption goes up, demand increases, more people buy, and the gross domestic product (GDP) grows.

There is a lack of governance. There is no new investment and infrastructure by the government or encouragement to businessmen to earn money or start a new business.

According to you, how would 2014 be for the traders?
Traders must be cautious in the coming year. We do not know what would be the position of the rupee.

If there is quantum easing in the United States, the rupee may go worse. Prices may also go higher. There is no clear picture in the amendment of food safety activities at the port by the government.

The only thing I can say is that the worst effect of this situation is going to be experienced by the consumers only. These may be housewives who buy groceries at retail outlets like Godrej Nature’s Basket or chefs who cook at hotels and restaurants.

There are going to be several changes in consumer preferences, because there is little choice left for them in the market, because of inflation.

The ingredients or products that they were using till now may not be found in the market. If found, they won’t be at the same market value as they were in the year 2012.