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Interview

"Technology has great potential to help food processing industry"
Monday, March 12, 2012 IST


Vadilal Industries Ltd, a leading ice cream player, is also known for processed food with significant exports of frozen vegetables and ready-to-eat snacks, curries and breads. Rajesh Gandhi, MD, Vadilal Industries Ltd, in an email interview with Anurag More, talks about challenges, opportunities and trends in food and beverages logistics.

How big is the logistics market in India? What is the share of food and beverage sector?

The overall logistics market in India currently stands at about Rs 3,50,000 crore and is expected to cross Rs 5,55,000 crore by 2014.



The industry has recently attracted only limited private investments following privatisation. As a result, the Indian logistics industry accounts for a mere 2% i.e. $100 bn of the $5,000 bn global logistics industry.

Talking about the food and beverage sector, the products accounts for over 30% off the consumer wallet and two-third of it is spent on primary and secondary processed products. The Indian food market is approximately Rs 2,50,000 crore of which value-added food products comprise Rs 80,000 crore.

What are the challenges faced by the food and beverage sector with regard to logistics?

India may be among one of the world's leading producers of horticulture products but more than half the fruits and vegetable produce ends up rotting as waste, even before it arrives in the market for sale.

The lack of efficient transportation and logistics management is leading to massive loss of income for the agricultural producers and creating cascading negative effects through the entire business value chain, hitting the end-consumer, who has to pay more for less of value.

The poor post-harvest methods of warehousing, storage and unsafe transportation from the point-of-production to the point-of-sale are among the most prominent challenges faced by the food and beverage segment.

What are the opportunities for logistics in the food and beverage sector?

Logistics should be viewed as a 'strategic enabler' and not only as a tool for cost reduction. The Indian food and beverage sector is growing by 25% and is expected to grow further in the time to come. Therefore, we believe that there are ample opportunities in logistics.

In a nutshell, the food supply & cold chain is temperature-sensitive and manual-handling reduces the product quality and life. Logistics providers with air conditioned trucks, automatic handling equipments and trained manpower for end-to-end support.

What steps should be taken to overcome the challenges in logistics?

Transportation and logistics usually take the largest share of costs in any fast-moving consumer goods company (FMCG) logistics budget. In fact, two-thirds of the logistics budget is typically spent on raw materials and finished product movement. Managing these costs has become increasingly strategic and complex. Niche solutions designed to meet specific challenges and issues of the food sector by logistics service providers (LSPs) are not only critical for a sustained growth but also form the core service infrastructure without which modern food and beverage industry cannot really be conceived.

Referring to the challenges faced, concrete steps like devising specialised courses on logistics should be offered to address the problem of lack of trained manpower in logistics in India.

Moreover, focus should be on the harvesting methods, storage and transportations.

An efficient cold chain operation or reefer cargo movement of agricultural produce that connects sellers and buyers is obviously the most effective answer to the problem.

What are the new trends happening in food and beverage logistics?

Some of the key trends in India's food economy that increasingly highlight the role and critical of logistics solutions are

" ● Growing interpenetration of regional food economies

" ● Demands and needs of food processing industry

" ● Emergence of food retail chains, branded food items

" ● Export and import of food products

We can also adapt state-of-the-art techniques such as cross docking that will reduce the transit times and inventory.

How is the future of logistics for food & beverage sector?

Logistics account for 15-25% of cost of goods in India, compared to 10-15% in the West. However, the Indian logistics industry is bordering the level of emerging logistics markets.

According to me, these key growth drivers can result in good outcomes: (i) a new tax regime (ii) increased external trade (iii) higher organised retail (iv) more outsourcing and (v) huge infrastructure development.

Referring to the growth drivers, introduction of VAT and phasing out of CST rise in FDI, greater organised retail, higher exports and imports, and greater logistics linkages as key enabling factors for the future of logistic market.

What kind of government support does the food and beverage industries seek for logistics?

The government should improve transport connectivity, strengthen the competitive and regulatory environment, grant industry status to the segment, provide subsidy for capital investment and create skilled workforce for the logistics business.

Particularly, for food and beverage segment, awareness for efficient cold chain operations and education should be encouraged.

What is the role of technology in logistics and what kind of technologies are being used in logistics?

Transportation and logistics services industry worldwide has developed a number of specialised diversified technology-driven solutions (based on cross-industry practices), which can be successfully leveraged by the food processing industry in India.

Technology such as barcoding and, more recently introduced, radio frequency identity tags (RFID), automated warehousing, packaging, labelling and branding, etc. has great potential to help the Indian food processing industry improve its market and business prospects.

Moreover, global tracking system with inbuilt temperature recording is also a great help in logistics.



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