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Magzine Nov - Dec 2012

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Page 1: Big Changes Bigger Challenges
Page 2: Big Changes Bigger Challenges
Page 3: Big Changes Bigger Challenges
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Ingredients BusinessNovember - December 20124

Editor’s Note

Bringing out the last edition of the year is always excit-

ing, and stressful. Exciting, because it gives you a chance

to play the future teller! Gazing at the crystal ball to predict

what’s next, and then bask in the glory of seeing it come true

— the sheer adrenaline rush is surely addictive and dangerous!

Stressful, because predicting what’s next in this changing-by-

the-minute industry isn’t a cake walk. But we did it neverthe-

less, with a little help from experts of course. So here it is, our

list on the Adult Beverage Trend, the new flavours that would

rule our palates in the coming season, and our verdict on

the recent FSSAI’s advisory where 38 companies were issued

notice for misleading advertisement. This issue we also look

back at one of the oldest industries of the country — Dairy

— and how it has fared since the epic White Revolution. Read

all about it in our cover feature THE MILK STORY (Page 06).

Follow it up with a generous serving of Cheese and scoops of

Ice creams as we bring to you the thoughts of industry’s two

most brilliant stalwarts, and their thoughts on what’s next?

Talking about regulations, we also get the dope on the new

Product Approval Law with experts’ advice on how to get your

product sanctioned without delay. And finally we wrap it up

with the trends in Adult Beverages.

After all, wishing you a great beginning of 2013 would be dull

without a nice glass to cheer.

B. K. Sinha

Executive Editor

Page 5: Big Changes Bigger Challenges

Ingredients BusinessNovember - December 2012 5

insideFounder Chairman Late Shri R.K. Prasad

Distributed by:New Media Communication Pvt. Ltd.

Managing Editor: Satya Swaroop Directors: B.K. Sinha & Kamaljit S.Group Editor: Dev Varam Executive Editor & COO: Bipin Kumar Sinha Editor Incharge: Madhulika Dash Editorial: Suresh Vasudevan, Uday Tarra Nayar, Jyoti Pathak, Atula Imchen and Wilfred MoraesConsulting Editors: Prabhuu Sinha and Tripat Oberoi

Group Director: Shamal PoteHead Marketing Services: Veerendra Bhargava Manager Marketing: Jimesh Patel, Nachiket Basole and Nalini Manikeri Strategic Advisor: Vinaya Shetty Head - Admin & Finance: Sunil KumarLiaison Officer: Vrunda GuravSupport Executives: Agnel Dias, Madhavi Singh and Arvinder Kaur SethiHead Circulation & Subscription: Rima VaswaniCirculation: Jawaharlal, Santosh Gangurde, Vijay Wangade & Suraj

Art Director: Santosh Nawar Senior Graphic Designer: Hemant Kolambe Photographers: Kishen Singh & Ramesh Singh

For Advertising Contact: 98207 [email protected]

For Subscriptions Contact [email protected]

BRANCHES: Kolkata: Anurag Sinha, Regional Head, Mob: 09830043339 / 09051112019Tel: 033-24537708. Fax: 033-24380719Email: [email protected] Bhattacharya, Special CorrespondentMob: 098313 39429P. Maitra

Pune: Jagdish Khaladkar, Regional Director, Mobile: 098230 38315 Email: [email protected] [email protected]

Patna:Rajesh Naraen, Vimmi Prasad & V.P. Tulsi173 - B, 2nd Floor, S.K. Puri, Patna 800001. BiharEmail: [email protected]: 09334390988

Australia Office: Bandhana Kumari Prasad, 129 Camboon Road, Noranda, Perth, W.A. 6062 Tel: 0061 892757447 Email: [email protected]

New Media Communication Pvt. Ltd., New Media House, 1 Akbar Villa,Marol-Maroshi Road, Andheri (E), Mumbai - 400 059. Tel: +91-22-2920 9999. Telefax: +91-22-2925 5279 E-mail: [email protected]

Printed and Published by Sukhbinder Singh and printed at Jayant Printery, 352/54, Gir-gaum Road, Murlidhar Temple Compound, Near Thakurdwar Post office, Mumbai -400 002 and published from New Media House, 1 Akbar Villa, Marol Maroshi Road, Andheri East, Mumbai 400059, India

Editor: Satya Swaroop PrasadThe news items and information published herein have been collected from various sources, which are considered to be reliable. Readers are however requested to verify the facts before making business decisions using the same.

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The Milk Story 06

Go Cheese!26

Automation is the KEY 31

Brewing in

201338 Emulsifier:The Big Indian Story 44

The New Food Rule

Book50

Ingredients BusinessNovember - December 2012 5

Hot in Beverage

2013 53

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Ingredients BusinessNovember - December 20126

Cover Story

In April this year, the Govern-ment of India and World Bank

signed a deal for an IDA credit of US$352 for their National Dairy Development Project. The goal: to benefit 17 million milk producing rural households by increasing the productivity of milk animals and improving market access. Milk production in India has always been dominated by small and marginal landholding farmers and by landless labourers who, in aggregate, own about 70 percent of the national milch animal herd. As crop produc-tion on 78 percent of the agricul-tural land still depends on rain, dairying, as a subsidiary source of income, is a real relief to most of these weaker groups in society. Thus making the milk industry one of the primary sectors of their growth and upliftment, not to men-tion nourishment too. What gives credence to this conviction is the ground reality. Often one or two milch animals enable these farmers

to generate sufficient additional income to break the vicious subsis-tence agricultural-debt cycle.

The success of Operation Flood has already proven how food aid can be used as an investment in building the type of institutional infrastruc-ture that can bring about national dairy development, especially in rural India. In the early 1950s, India was commercially importing around 55000 tonnes of milk powder annually to meet the urban milk demand. Currently, the quantity has substantially reduced, thanks to better milk procuring and distribu-tion capacity.

But even after 40 years, the reliance

on low-cost and often-subsidized commercial imports as well as gifts is seriously affecting the develop-ment of dairying systems in India. Result, depressed domestic milk prices have made dairying uneco-nomical for most local milk produc-ers. A prove of the same was when farmers in north spilled milk on the road to protest the rise of cattle feed prices. This in spite the fact that the milk production in North is so low that at times top brands like Mother Dairy too suffers from shortage of supply of milk.

Undoubtedly, the major challenge for the dairy sector is to increase milk production in order to meet the increasing demand resulting

Cover Story

THE REVOLUTION MADE INDIA, THE WORLD’S SINGLE LARGEST PRODUCER (AND CONSUMER) OF MILK WITH AN ANNUAL PRODUCTION OF OVER 120 MILLION TONNES IN 2012. BUT HAS THE RECENT RISING COST AND UNADDRESSED ISSUES BOUGHT THE MILK REVOLUTION TO A GRINDING HALT? INGREDIENTS BUSINESS TAKES A LOOK BACK AT THE FOUR DECADES OF MILK AND MILK INDUSTRY.

Ingredients BusinessNovember - December 20126

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from the almost inevitable expan-sion of population and growth of disposable income. To mitigate such challenges there is an ardent need of policies that are market oriented; technologies that are suited for pro-duction, procurement, processing and marketing; and the develop-ment of social, economic, political and cultural environment that is conducive for dairy development..

In India though, most of the sig-nificant developments in dairying in India have taken root in the current century – which is pre- and post-Operation Flood.

DAIRY, PRE- OPERATION FLOOD ERA

The earliest attempts at dairy development can be traced back to the British era, when the Defence Department established military dairy farms to ensure a constant supply of milk and butter to the colonial army. The first of these farms was set up in Allahabad in 1913; subsequent facilities were established at Bangalore, Ootaca-mund and Karnal. These farms were well maintained and, even in those early stages, emphasised on improved milch animals rearing. As animals were reared under farm conditions, some herd improvement was made using artificial insemina-tion. Though ineffective in meeting

the urban demands, the change did well for military purposes.

The growth of the population in urban areas led to the start of everal cattle sheds in different cities. Though not environmentally sound approach, they soon became the lifeline of many a city dwellers. The sudden rise of unorganised dairy farms led to these high-yielding cattle developing sterility problems, which considerably reduced the number of carvings. Once the cattle became unproductive, they were sold to slaughterhouses. This practice systematically drained the country of

its genetically superior breeds.

It was not until WWII that modern dairy farms came into existence in cities like Mumbai, Kolkata, Chen-nai and Delhi. The rise of modern dairy farms led to the emergence of dairy products — essentially pro-cessed milk, table butter and ice-creams. Polsons, Keventers and the Express Dairy became the pioneers of urban processing dairies, with the focus still being milk quantity than quality. These early modern systems did little to develop the quality of milk, livestock or even the industry—as despite modern-ized processing facilities, dairying remained unorganized.

It was India’s first Five-Year Plan in 1951 that dairy became a priority

with the government. The goal was to provide hygienically milked, healthy milk to the country’s grow-ing urban population. Initial gov-ernment action in this regard con-sisted of organizing “milk schemes” in large cities. To stimulate milk production, the government imple-mented the Integrated Cattle De-velopment Project (ICDP) and the Key Village Scheme (KVS), among other similar programmes. In the absence of a stable and remu-nerative market for milk producers, however, milk production remained more or less stagnant. Till the 1970, the growth rate in milk production

was barely 1%per annum, while per capital milk consumption declined by an equivalent amount.

By 1960s, various strategies by state governments had failed to elicit any results. The only advantage of the sudden interest was the bevy of dairy processing plants and milk colonies that were set up in Mum-bai, Kolkata and Chennai. The milk production capacity was still an issue. Milk’s perishable nature and relative scarcity gave the milk vendors leverage, which they used to considerable advantage. This left these government-run dairy plants with little choice but to run the establishments with large quantities of relatively cheap, com-mercially imported milk powder. The daily per capital availability of

Depressed domestic milk prices have made dairying uneconomical for most

local milk producers, especially the poor farmers

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milk dropped to a mere 107gram during this time. High-fat buffalo milk was extended with imported milk powder to bring down the milk prices, which resulted in a decline in domestic milk production. As the government dairies were meet-ing barely one-third of the urban demand, the queues of consumers became longer while the rural milk producer was left in the clutches of the trader and the moneylender.

All these factors combined left Indian dairying in a low-level equilibrium. The establishment and prevalence of cattle colonies emerged as a curse for dairying in the rural hinterland as it resulted in a major genetic drain on the rural milch animal population, which could never be replaced. City dair-ies, on the other hand, also added to environmental degradation.

CHANGE OF THE MILK WAVE

Milk procurement from the rural areas and its marketing in the urban areas was a major challenge for much of the first few years post independence. In one of the earliest urban milk supply schemes, Polsons — a private dairy at Anand —

procured milk from milk producers through middlemen, processed it and then sent the milk to Mumbai. Mumbai then, much like now, was a good market for milk and Polsons’ profited immensely. In the mid-1940s, when the milk producers in Kaira asked for a proportionate share of the trade margins, they were denied even a modest increase. The milk producers went on strike, refusing to supply milk to Polsons. On the advice of Sardar Vallabhbhai Patel, a leader in India’s independence movement, the milk producers registered the Kaira District Cooperative Milk Producers’ Union, now famous as AMUL, in 1946. The Kaira Union procured milk from affiliated

village-level milk societies. Thus was the beginning of what was later referred to as the White Revolution.

Between 1946 and 1952, Amul’s policy was directed towards obtaining monopoly rights for the sale of milk to the Bombay Milk Scheme. In 1952, it succeeded in achieving its purpose after the Government of Bombay cancelled the contract with Polsons and handed over the entire business of supplying milk from the Kaira district to Amul. However, given Bombay Milk Scheme’s earlier commitment to purchase milk produced by the Aarey Milk Colony, this deal could not be fulfilled, therefore forcing Amul to look for other vendors. The brand tried recovering by cutting down on purchase of liquid milk, but with members agitating, the brand soon devised a clever way to deal with the extra supply: milk products. In 1955, a new dairy plant was set up at Anand to produce butter, ghee and milk powder. Today, it’s the largest plant producing a lion share of the industry’s total butter, ghee and cheese requirements.

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And is also the most successful co-operatives in the country, on which many more were later modelled but couldn’t succeed.

In 1965, Amul build a second diary and to meet the rising demand. And six years later, established yet another product manufactur-ing unit to cope with increasing milk procurement. In 1993, a fully automatic modern dairy was constructed adjacent to the original Amul dairy plant at Anand.

To all the modernisation, Amul still runs on the basic unit, which was modelled as the milk produc-ers’ co-operative society at the village level. These co-operatives are organizations of milk producers who wish to market their milk col-lectively. Membership is open to all who need the cooperative’s services and who are willing to accept the responsibilities of being a member. Decisions are taken on the basis of one member exercising one vote. No privilege accrues to capital, and the economic returns, whether profit or loss, are divided among the members in proportion to patron-age. Each co-operative is expected to carry out the continuing educa-tion of its members, elected leaders and employees. All the milk co-operatives in a district form a union that, ideally, has its own processing and quality check facilities.

All the unions in a state are normally members of a federation whose prime responsibility is the marketing of milk and milk prod-ucts outside the state. There is also a fourth tier, the National Coop-erative Dairy Federation of India (NCDFI), which is a national-level body that formulates policies and programmes designed to safeguard the interests of all milk producers. Each tier of the Anand organiza-tional structure performs a unique function: procurement and services by the cooperative; processing by

the union; marketing by the state federation; and advancing the interests of the cooperative dairy industry by the national federation.

OPERATION FLOOD

The strategy for organised dairy development in India was actu-ally conceived in the late 1960s, a few years after the formation of the National Dairy Development Board (NDDB) in 1965. Operation Flood became a unique approach to dairy development. During the 1970s, dairy commodity surpluses were building up in Europe, and Dr Verghese Kurien, the found-ing chairman of NDDB, saw in those surpluses as an opportunity and a threat too. The threat was massive exports of low-cost dairy products to India, which, had it occurred, would have stalled the already staggering dairy industry completely. The large quantities that India was already importing had eroded domestic markets to the point where dairying as an occupation was not viable – sadly, the current state is no different.

The opportunity, on the other hand, was built into the Operation Flood strategy. Designed basically as a marketing project, Operation Flood recognized the potential of the European surpluses as an investment in the modernization of India’s dairy industry. With the assistance of the World Food Pro-gramme, food aid — in the form of milk powder and butter oil — was obtained from the countries of the European Economic Community (EEC) to finance the programme. It was the first time in the history of economic development that food aid was seen as an important investment resource. Use of food aid in this way is anti-inflation-ary, it provides a buffer stock to stabilize market fluctuations and it can be used to prime the pump of markets that will later be sup-plied by domestic production. The overriding objective of all aid is, or rather should be, the elimination of the need for aid. The use of food aid, say experts, as an investment is the most effective way of achiev-ing this objective.

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Put together with the thought of developing dairying by replicat-ing the Anand Model for dairy development, which stood the test of time for almost half a century, the phase one of Operation Flood was launched in 1970 following an agreement with the World Food Programme, which undertook to provide as aid 1,26,000 tonnes of skim milk powder and 42,000 tonnes of butter oil to finance the programme.

The programme involved organising dairy co-operatives at the village level; creating the physical and institutional infrastructure for milk procurement, processing, marketing and production enhancement services at the union level; and establishing dairies in India’s major metropolitan centres. The main thrust was to set up dairy co-operatives in India’s best milksheds, linking them with the four main cities of Bombay, Calcutta, Delhi and Madras — that held a commanding share of the milk market back then, and now too. In achieving that goal, the first phase of Operation Flood laid the foundation for India’s modern dairy industry, an industry that would

ultimately meet the country’s need for milk and milk products.

The second phase of the programme was implemented between 1981 and 1985. Designed to build on the foundation laid in the first phase, it integrated the Indian Dairy Association-assisted dairy development projects being implemented in some Indian states into the overall programme. About US$150 million was provided by the World Bank, with the balance of project financing obtained in the form of commodity assistance from the EEC.

The current, third phase of Opera-tion Flood aims at ensuring that the cooperative institutions become self-sustaining. With an investment of US$360 million from the World Bank, commodity and cash assistance from the EEC and NDDB’s own internal resources, the programme envisages sub-stantial expansion of the dairy processing and marketing facilities; an extended milk procurement in-frastructure; increased outreach of production enhancement activities; and professionalization of manage-ment in the dairy institutions.

And while on paper, most sounds like the perfect plan to bring out Indian dairy of its sorrow state, the big question is will it work now? What should be the priority given the new found interest of many dairy companies abroad in India?

MILES TO GO... AND THE CHALLENGES

No doubt Operation Flood is considered the central event of twentieth-century dairying in India. An analysis of the lessons learned through the implementation of the programme should be useful for those involved in formulating dairy development policies and pro-grammes for the developing nations of Asia and Africa.

The network of co-operative institutions created through the Operation Flood programme now comprises 70,000 dairy cooperative societies in 170 milksheds, encom-passing 8.4 million milk-producer families. The average milk procure-ment by these co-operatives has now reached some 12.3 million kg per day, of which 8.2 million litres are marketed as liquid milk, while the remainder is converted

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into products such as milk powder, butter, cheese, ghee and a wide range of traditional milk products. Milk-processing capacity of ap-proximately 15.6 million litres per day, chilling capacity of 6.5 million litres per day and milk powder pro-duction capacity of 726 tonnes per day have been established through the programme. But there are still challenges. Like transporting milk in a subtropical country like India, for instance. This despite Opera-tion Flood putting in place about 140 insulated rail milk tankers, each with a capacity of 40,000 litres, supplemented by another 25 rail tankers of 21,000-litre capacity, and 1,000 insulated road milk tankers operate throughout the country. In addition to this, a large milk powder storage capac-ity was also created to balance seasonal variations in milk supply and demand during summers. The arrangement though enabled the operation of a national milk grid, balancing regional fluctuations in milk procurement and demand-and-supply gaps resulting from con-centrated production of liquid milk in selected milksheds, but it hasn’t been able to keep up with the ad-ditional demand rise each year.

The investment and achieve-ments in modernizing has led to an increase in annual production, which had stagnated to between 20 million and 22 million tonnes

during the 1960s to around 59 million tonnes and now close to 210 millon tonnes. Commercial imports, a regular in 1950-60s, comprising 50 to 60 percent of the dairy industry’s total throughput have been brought down to dairy commodities restricted to those donated by the EEC.

There is no denying that Operation Flood has demonstrated India’s rural population enormous energy, initiative and wisdom — all that was needed was an opportunity to control the resources that it had created. But since the past two decades there has been little on the front of dairy developing. Take the example of co-operatives. Unlike the first phase of Operation Flood, the number of new village dairy cooperatives organized in areas outside Gujarat in last 15 years is negligible. Capacity expansion in dairy cooperatives has also slowed down significantly. As per experts:

• Funds released to genuine dairy cooperatives except Gujarat and Karnataka was anyways insignificant. Lot of funding was diverted to Mother Dairy Pvt Ltd. directly or indirectly, which is described as ‘cooperative’ when suited and an indepen-dent company when suited so.

• Most of the policy decisions

such as duty free imports or banning of exports were influ-enced by precarious failure of Mother Dairy Foods Limited in securing stocks at the price the ‘company’ wanted! These were often counter-productive and have worked against the interests of producers and even consumers in long run.

• Since 1995 adulteration of milk has increased particularly in North India vis-a-vis states like Karnataka, Andhra, Kerala and Tamil Nadu.

• Since 1995 the world has de-ployed break through techno-logical application like sexed semen in Brazil, China, Israel, US, EU and Oceania. So Why has India lagged behind and does not have even a single se-men station? None owned and managed by NDDB nor have they developed or even se-cured this technology. Why our performance is so dismal? Same is the condition on feed-fodder export policy and productivity.

But with the European Community [EC] recently deciding to support the third phase of this national dairy development programme in India with new multi-annual food aid supplies, finally the scene may look dairy happy. �

140 insulated rail milk tankers, with a capacity of 40,000lts each, 25 rail tankers of 21,000lts and 1,000 road milk tankers. But are we there yet?

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Dairy products are a major source of cheap and nutritious

food to millions of people in India, and perhaps the only acceptable source of animal protein for large vegetarian segment of India, espe-

cially for women. But what made dairying one of the activities aimed at alleviating the poverty and un-employment especially in the rural areas in the rain-fed and drought-prone regions was a 1986-87 survey.

As per the report, about 73% of rural households own livestock, small and marginal farmers account for three-quarters o f these house-holds owning livestock, raising 56% of the bovine and 66% of the sheep

THE WORLD BANK WILL SUPPORT OPERATION FLOOD III WITH A LOAN OF $360 MILLION’ (RS 4680 MILLION) ON A TOTAL PROJECT BUDGET OF AROUND $700 MIL-LION. THE REST OF OPERATION FLOOD III WILL BE FINANCED WITH FUNDS GENERATED BY NEW EC DAIRY AID (RS 2126 MILLION) AND WITH THE EXISTING RESOURCES OF THE NATIONAL DAIRY DEVELOPMENT BOARD (RS 1960 MILLION). BUT IS IT ENOUGH TO MEET THE DEMANDS OF A GROWING MARKET?

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population. According to the Na-tional Sample Survey of 1993-94, livestock sector produces regular employment to about 9.8 million people in principal status and 8.6 million in subsidiary status, which constitute about 5% of the total work force. Thus, a progress in this sector will result in a more balanced development of the rural economy and meeting the rising demand.

POLICY

The total amount of milk pro-duced has more than tripled from 23 million tonnes back in 1973 to 220 million tonnes now. The tremendous rise in milk production is primarily the fallout of the dairy farming policy reflected in Opera-tion Flood. Following the success of dairy farming policy, the Govern-ment has set up a dairy processing policy, reflected in the Milk and Milk Products Order. In addition,

the Government uses a variety of import restrictions to protect its do-mestic dairy market. But lately such restriction has only boomranged on the farmers who find ‘dairying’ ecomonically not viable.

MILK PROCESSING

The milk processing industry is small compared to the huge amount of milk produced annually. Only 10% of all the milk is delivered to

some 400 dairy plants, thanks to the unorganised sector of milkmen, vendors who collect the milk from local producers and sell the milk in both, urban and non-urban areas, which handles around 65-70% of the national milk production. In the organised dairy industry, the co-operative milk processors have a 60% market share. The co-operative dairies process 90% of the collected milk as liquid milk whereas the private dairies process and sell only 20% of the milk col-lected as liquid milk and 80% for other dairy products with a focus on value-added products. Given the schedules, any shortage of supply will have direct impact on the pric-ing of milk.

DOMESTIC CONSUMPTION

The huge volume of milk produced in India is consumed almost entirely by the Indian population itself, in

a 50-50 division between urban and non-urban areas. The rest are taken in by fast-food chains and food and non-food industries using dairy ingredients in a wide range of products.

TRADE

In spite of having the largest milk production, India’s role in the world market is rather insignificant. India was primarily an import dependent

country till the early seventies. Most of the demand-supply gaps of liquid milk requirements for urban consumers were met by importing anhydrous milk fat / butter and dry milk powders. But with the onset of Operation Flood Programme, the scenario dramatically changed and commercial imports of dairy products came to a halt except occasional imports of very small quantities. In the 1990s, India started exporting surplus dairy com-modities, such as SMP, WMP, butter and ghee. The Agricultural and Processed Food Products Export Development Authority (APEDA) regulated the export and import of dairy products till early 1990s. However, in the new EXIM Policy announced in April 2000, the Union Government has allowed free import and export of most dairy products. The major destinations for Indian dairy products are Ban-gladesh (23.1%), UAE (15.4%), US

(15.6%) and Philippines (8.9%). In terms of products, SMP is the most important product accounting for about 63% of total export vol-ume, followed by ghee and butter (11.7%) and WMP. Export figures clearly demonstrate that the Indian dairy export is still in its infancy and the surpluses are occasional. A major part of India’s dairy export to the world comprises of indig-enous milk products (think paneer)

Livestock sector employs about 9.8 million people in principal status and

8.6 million in subsidiary status — milk farmers essentially

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and desserts (read: Indian sweets). In fact, Mother Dairy has recently introduced its new range of Indian mithai for export purposes only. A 2004 report by the Foreign Trade Statistics showed that the imports of dairy products (milk and cream) has reached a cumulative total of 22,145 million tonnes, a steep rise form 1473 million tonnes for the previous year. The main reason for such a sharp rise in imports are huge export subsidies given by developed countries (mainly the US and EU). India has recently concluded a tariff rate quota to deal with US, EU and Australia on imposing custom duty of 15% on imports of SMP and WMP upto 10,000 tonnes and 60% on imports beyond this level.

KEY AREAS OF CONCERN IN THE DAIRY INDUSTRY TODAY

• Competitiveness, cost of pro-duction, productivity of animals etc. The demand for qual-ity dairy products is rising and production is also increasing in many developing countries. The countries which are expected to benefit most from any increase in world demand for dairy products are those which have low cost of production. There-fore, in order to increase the competitiveness of Indian dairy industry, reduction of cost of production is a must. Increasing productivity of animals, better health care and breeding facili-ties and management of dairy animals can reduce the cost of milk production. The Govern-ment and dairy industry can play a vital role in this direction.

• Production, processing and marketing infrastructure If India

has to emerge as an exporting country, it is imperative that we should develop proper produc-tion, processing and marketing infrastructure, which is capable of meeting international quality requirements. A comprehensive strategy for producing quality and safe dairy products should be formulated with suitable legal backup.

• Focus on buffalo milk-based speciality dairy industry in India is also unique with regard to availability of large proportion of buffalo milk. India produces 64.4% of the world total buffalo milk and has nearly 78 mil-lion well bred reverine for this purpose.

• Import of value-added products and export of lower value prod-ucts. With the trade liberalisa-

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tion, despite the attempts of In-dian companies to develop their product range, it could well be that in the future, more value-added products will be imported and lower value products will be exported. The industry has to prepare themselves to meet the challenges.

Since liberalization of the dairy sector in 1991, a very large number of private sector companies / firms have, despite MMPO, established dairy factories in the country. The share of the total milk processing capacity by private sector is 44% of total installed capacity of 73 MLPD (Million Litres Per Day) in the country, which is barely 12%. What , therefore, is disturbing is that as much as 88% share of the total milk production is commanded by the unorganized sector who specializes in selling sub-standard, unpas-teurised milk more often than not adulterated with harmful chemicals. Besides, growth in milk production is likely to continue at the present rate of 4.4% in the near future. Question now is: Who is going to handle this incremental milk? We must bear in mind is both income and price what we must bear in mind both income and price elastic-ity account for approximately 15% of the total expenditure of food. Demand for milk, at current rate of income growth is estimated to grow at 7% per annum. Interestingly, de-mand for milk is expected to grow steadily over the next two decades as the low income rural and urban families who have higher expendi-ture elasticity would also increase their income due to new economic environment. Let us now look at some other economic indicators. According to the World Bank, India is the fourth largest economy in the world going by the purchas-ing power parity estimates. Further, India has been identified as among the first 10 emerging markets in

the world. India has the vastest domestic market in the world with over one billion consumers — a majority of whom are vegetarians with drinking of milk as habit. The untapped potential of the dairy sector is immense and opportunity to set up a new dairy venture is great. In the words of Dr. Amrita Patel, Chairperson, NDDB, “there is enough place under the scheme for both private and cooperative sectors. Notwithstanding the above potential it is cautioned that, enter-ing dairy sector is not going to be a cakewalk.”

LOOKING AHEAD

That there is tremendous scope for the growth of the dairy industry in the new millennium. The product mix of world dairy trade is likely to shift further towards cheese. This has been developed in the world markets.

As the market opens up, consump-tion trends associated with these markets will have increasing influ-ence on the world trade. Whole milk powder is likely to continue to be a substantial beneficiary and growth substantially in the middle east countries. As standards of liv-ing in the importing country rises, exporting countries will increasingly concentrate on whole milk powder and cheese with the assistance of butter and skimmed milk powder. There is vast potential for the export of dairy products, the cost of milk production in India being the lowest. The major factor influenc-ing production of by-products is the newer uses that may be developed through R & D support. Milk pro-teins are being utilized increasingly replacing animal and vegetable proteins in special bakery products and instant foods.

The cheese market, presently val-ued at about 80 crore is growing at about 9% annually. There are more

than thousand varieties of cheese, which have been listed out of which cheddar; mozzarella, gouda and processed cheeses are being manu-factured in India. Pizza is becoming a very popular item in the market.This segment alone commands 5% of the share in the cheese market and other area is fermented milk products. Dahi even though is a 15,000 crore market, the share of the organized sector is only around 10%. This product has immense po-tential for growth. Varieties of milk-shakes are also increasing wherein milk and fruit pulp are mixed in different proportions to produce dif-ferent beverages. Some of the milk and fruit based beverages which are likely to have demand are a combi-nation of milk with mango, banana, sapota, strawberry, papaya, etc. Some of these beverages can also be produced in dehydrated form and can be an excellent health food.

There are varieties in traditional milk based sweets, manufactured in the country. The market size is around 12,000 crore. However, there are very few nationally known brands in this category. Many of the organized dairies are involved in the manufacture of varieties of milk based sweets: pedha, paneer, shirkhand, etc. These are now restricted to certain areas only but can go national. As the world is getting integrated into one market, quality certification is becoming essential in the market. However, there are very few plants in the country, which have successfully obtained ISO, HACCP certifica-tion. There is scope for introducing newer plants adopting newer pro-cesses by the dairy industry in the country. Packaging of dairy prod-ucts is also another very promising area. The need now is for bigger investment not only for modernisa-tion of the dairy industry, but to build biotechnology related dairy farms that can match demand. �

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TheBIG DROPITS UNDENIABLE THAT OPERATION FLOOD, EVEN THOUGH STARTED AS A MARKETING INITIATIVE, HAS GIVEN US MORE THAN A FAIR SHARE TO EVOLVE AN INDUSTRY THAT WAS FOR LONG CONSIDERED A SUBSITITUTE OCCUPATION. BUT FOUR DEACDES LATER, HOW WELL HAVE WE SCORED ON THE ONE OF THE BEST STRATEGIES IN THE MILK AND MILK INDUSTRY GLOBALLY. WE PRESENT THE SWOT ANALYSIS ON THE INDIAN MILK INDUSTRY — THE DRIVERS, THE PERFORMANCE AND MOST IMPORTANTLY, WHAT’S NEEDED TO SUSTAIN THE GROWTH, EFFCIENTLY AND EFFECTIVELY.

Where does the dairy industry stand, and the boost it really needs...

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STRENGTHS HOW TO BUILD ON THEM

• Large number of small and marginal farmers involved in dairying

• An effective marketing channel helps to meet the demands of the urban consumer

• Very large number of animals and huge scope to enhance productivity

• Self-sufficiency in medicine production and do not have to rely on exports

• Strengthen economic viability of dairy farms by inter-ventions on the input side as well as ensuring more fair farmer prices

• Increase the link between rural production areas and urban markets

• Focus on strengthening the indigenous breed to help significantly enhance productivity

• Ensure availability of quality medicines by strengthening regulatory framework for quality

WEAKNESSES HOW TO CORRECT THEM

• Large share of milk (70–85%) of marketable surplus goes through informal channel where quality is a big concern

• Sometimes quality is an issue in the formal channel as well

• Very little competition to cooperatives because private sector was not allowed to participate in until recently

• Farmers do not share in the benefits of high demand because of poor governance of cooperatives

• Milk production is scattered over a large number of farmers producing miniscule quantities

• Milk distribution is limited to urban and peri-urban areas• Low milk prices because of lower prices declared by

cooperatives, which results in low prices of milk paid by all players

• Ad hoc export policies and a ban on exports• Quality of milk and milk products are a barrier to entry

to the export market, especially the EU and the USA• Lack of policy focus on strengthening indigenous breeds• Non-existent extension facilities• Farmers’ prices are not based on fat measurement, which

affects their profitability• Because of low access to credit and risk-taking ability,

farmers cannot increase their herd size

• Focus on quality issues even in the informal channel by training traders and by enforcing food quality regulations

• Develop infrastructure and training for clean milk pro-duction

• Bring changes in cooperatives to make them true repre-sentatives of farmers instead of functioning as parastatals.

• Support to dairying as an enterprise to encourage com-mercial dairy farming and encourage production and productivity by extension and breed development

• Enhance packaged milk distribution in more areas• Strengthen dairy farmer cooperatives to enable farmers

to get a higher price for milk• Create rational export policy to enable farmers to take

advantage of higher prices• Strictly implement quality regulations and improve infra-

structure and training for quality• Strengthen the breed development programmes• Strengthen extension facilities• Create policy regulations to make mandatory testing as a

basis for setting milk price• Increase access to credit through dairy farmer organiza-

tions and other agencies

OPPORTUNITIES HOW TO PURSUE THEM

• Increase farmer income by exploiting the high demand• Increase consumer sophistication and awareness of qual-

ity rof packaged products• Entry of large corporations in retailing, leading to larger

investment• Scope to enhance governance of dairy farmer organiza-

tions and thus enable dairy farmers to demand higher prices

• Potential for exports due to low cost of production• Overall positive growth environment, which is triggering

the Government to enhance infrastructure

• Create policies and activities geared towards enhancing dairy farming activity by increasing, production, produc-tivity and ensuring fair farmer price of milk

• Establish enabling policy environment to enhance invest-ment

• Create policy support to enhance governance of producer companies

• Focus on quality issues that are a barrier to exports• Encourage private sector to increase investment in

dairying

THREATS HOW TO AVERT THEM

• General lacuna about quality issues in milk• High price sensitivity for dairy products• Significant increase in maize prices that is affecting the

cattle feed cost• Large informal markets that extend credit are constrain-

ing farmers• Low productivity and scattered production leading to

high cost of transportation• Emphasis on milk fat and not on SNF content

to maintain relatively lower prices of milk

• Initiate consumer education about the negative health impacts of unpackaged products

• Develop packaging in small quantities to meet the needs of the poor

• Increase milk prices in accordance with feed prices• Support expansion of dairy farmer organizations• Enhance productivity by breed improvement and

extension• Enforce price setting of milk based on fat and SNF

content to encourage production of cow milk

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IIngreedients BBuusinesssNovvember - DDecemmbber 20012 2211

CCovveer SSStoooryyy

With milk forming the backbone of the dairy indus-try, milk production is one of the most important

considerations, among others, that need to be addressed at the earnest. This can start with the selections of the best traits in animals of that breed, followed by the nec-essary improvements that are required to take that breed a step ahead to match the target productivity. Once we have selected those traits that are desirable, it then comes down to progeny testing those selected breeds. This though is a common rule followed in the rest of the world, in India such ‘testing’ seems to be nonexistent. Which brings us to the important quandary facing the industry today: If cross breeding programme has been such a success over the past 25 years, why has produc-tion not increased as desired?

A visit to some of the top modern dairy units abroad have revealed that there is no reason why the new technologies and systems cannot be brought to India or implemented successfully. Some of these systems are:

• Auto Identification• New Milking Claw technology• Electronic Milk Meters• Stimulation to the Udder to allow full milk let down• Individual cow information display• Conductivity of the milk• Auto shedding and weighing systems• Backing gate for ease of cow through put during

milking

THE CURRENT QUALITY OF CATTLE IN INDIA IS WELL BEHIND THE REST OF THE WORLD IN PRODUCTION AND TRAIT TERMS BECAUSE OF THE OLD POLICY OF NOT ALLOWING NEW GENETIC MATERIAL INTO INDIA. AND IT IS NOT HELPING INDIA TO GROW, SAYS MILCH LIVESTOCK EXPERT AND FARM MANAGER, BHAGYALAXMI DAIRY FARM EDMUND PIPER. AN INGREDIENTS BUSINESS SPECIAL

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• Auto CIP (circulation inline of plant) cleaning. This allows the system to be hygienically cleaned after each milking ses-sion, leaving it sterile for the next milking.

• A dairy management pro-gramme, which will assist the milking supervisor as well as the day-to-day management deci-sions. This system allows easy analysis of the herd performance and act accordingly.

In addition to these, there is a need of modern methods of feeding both milking cows and young-stock. We need a system that can ensure continuous flow while keeping the feed ingredients in a homogenous mixture of balanced feed. This is the reason why the TMR (total mixed ration) system was first adopted. A specialised TMR mixer can feed individual cow groups more accurately, and also give the management team the versatility to alter the ration and incorporate new ingredients as and when found and procured. But bringing all this technology in place is just half the battle won. One has to also find a motivated, skilled management team, which can keep the system working smooth, and can under-stand all of its complexities, and comprehends issues as the systems have to be constantly fine tuned as the farm expands, by using innova-tive ideas and new technology.

In my experience in India this far, I feel the ground issues for me is the availability of clean, fresh and uncontaminated feed ingredients that are not adulterated. This is important to ensure that what goes in must have an impact on what comes out – in other words, high quality milk. At Bhagyalaxmi Dairy, we take extra precautions to ensure the cleanliness of our milk, both in the hygiene of the milking parlour routine and in the sheds. Thanks to our stringent laws, we probably

have the lowest bacterial count in raw milk in India today. We have to understand and sensitise people, es-pecially milk farmers, of the nature of milk and that it is a perishable product that it needs to be kept at a certain temperature to maintain its shelf life.

Another issue plaguing the dairy farm are health issues of the milch animals. For one of the biggest rev-enue churners, there are no health regulatory bodies for dairy livestock. The lack of vaccines for instance has a profound effect on the health of dairy livestock, and the deliver-ance. We invest a lot of money on imported semen/sexed and embryos so the next generation is genetically superior to the existing breeds. But a lack of health system in place doesn’t really serve the purpose completely. As each animal dying or going through unnatural abor-tion not only causes huge economic losses, production backlog, but affects the behaviour of the others cows in the vicinity. Thus, empha-sising the need of a proper health system for healthier cows. One of the mastered techniques of improv-ing the quality of all livestock in India is by selective breeding. What are the positive traits that are desir-able to that breed, for the purpose of production for an ever increasing population? One of the standing examples of what thorough selec-tive breeding can do is what the Brazilians did with the indigenous Gir breed that were bred with the Holstein Friesian cow to produce a Girlander breed that has the abil-ity to produce 6,000-8,000 litres of milk /lactation. What did the cross breeding programme in India achieve? As of now, that quantity is compromised with random breeding at ground level.

The techniques appliedat the farm that have made the single, big impact would be the Standard Operating Procedures and the

individual protocols and pro-grammes. That means that every-body follows the same procedures, level changes notwithstanding. This allows accurate monitoring of milk-ing trends and performance of the herd and work force. In my opinion that is the only way to improve the quality of milk. Proper sanitisation protocols before and after milking, and an immediate cooling of milk at 4 Degree Celsius is a must.

Another thing that can keep in mind is to keep a close tab on a cow’s behaviour. It’s always benefi-cial to understand a cow from its evolutionary period. The cow has been designed with 4 stomachs to digest good quality rumen degrad-able forages (alfalfa), berseem, chopped cobbed maize, forage sorghums, hybrid napiers, whole crop wheat and many other grass varieties. Most of these are avail-able and can be grown by Indian farmers. A good understanding of the breeds also means that you are tuned to understand when the cow is under duress, sick or experiencing any other kind of problem.

Sugar cane tops and paddy straw, are not good quality fodder prod-ucts and don’t contain the right nutrients to produce the desired result—milk production and fertil-ity, to name a few. The idea is to balance the feeding to the genetic potential ( tap in to its ability to produce milk) of that cow within the economic boundaries that prevail in India today. It is therefore of paramount importance to grow or source products that you know have the quality and quantity that will give you the desired perfor-mance from the cow year round.

I suppose the magic ingredient is to sensitise and run extension programmes to bring new simple solutions and ideas to the outlying farmers who have not been exposed to these new innovative practises. �

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Ingredients BusinessNovember - December 201224

With the Global Hot Beverages market expected to reach

$125 billion by 2017, growing at an estimated 10.9% annually from 2012 to 2017, the tea and coffee market is all set to become the next big market, both for the manufac-turers and retailers of tea and cof-fee, as well as ingredients creator.

Adding to this growth in India is the incoming of various brands includ-ing the world famous Starbucks. The World Tea & Coffee Expo 2013 (www.worldteacoffeeexpo.com), scheduled to be held at Mumbai, In-

dia from 15th – 17th February 2013, is an effort to understand and de-velop the required infrastructure of the future market. One of the kind to be held in India, the World Tea & Coffee Expo is expected to bring together close to over a 100 exhibi-tors from 8 countries, covering the various sectors involved in creating the market. Internationally, the market for RTD (Ready to Drink) tea and coffee in terms of revenue is expected to reach US $125 billion by 2017 as against US $69 billion in 2011 (estimated) signaling an

anticipated annual growth of 10.9 % between 2012 to 2017.

The World tea & Coffee Expo 2013 (WTCE) in fact is the only trade show in India dedicated to the Tea & Coffee sectors, and will have a judicious mix of Indian & International Exhibitors. On display will be products, brands & technologies from across the world comprising of Tea & Coffee Manufacturers, Tea Gardens & Coffee Estates, Tea & Coffee Wholesalers & Dealers, Exporters & Importers, Raw Materials Suppliers

Coming Soon

FIRST OF ITS KIND EXPO IN INDIA, WORLD TEA & COFFEE EXPO 2013 IS AN AT-TEMPT TO HIGHLIGHT THE GROWTH POTENTIAL OF HOT BEVERAGES IN INDIA— WITH SPECIAL MENTION TO THE FAST GROWING MARKET OF CAFES AND COFFEE HOUSES

in the

Ingredients BusinessNovember - December 201224

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Coming Soon

& Manufacturers, Sweetener Manufacturers, Machinery MFRs & Packaging companies, Chain Stores / Franchisors, Fine Chocolate & Gourmet Mint MFRs, Processors & Processing machinery MFRs, Tea / Coffee Vending Machines Manufacturers, Flavoured Beverages Manufacturers and Manufacturers of Equipment & Appliances.

Supported by leading Trade Bodies like Tea Board of India (Govt of India), Federation of Indian Tea Traders Association (FAITTA), Bombay Tea Traders Association (BTTA), India-China Chamber of Commerce & Industry, Small and Medium Business Development Chamber of India, Confederation of Indian Small Tea Growers Assoc (CISTA) and Darjeeling Tea As-sociation, the expo aims to bring the various players of the market to develop synergies that can help them work better.

Says Priti Kapadia, Director, Sentinel Exhhibitions P Ltd, the organizers of this event, “Among the most popular beverages around the world, the Tea and Coffee sectors provide employment to several million workers worldwide, both in plantation activities, as well as in indirect and allied activities. Rising consumer awareness about the health

hazards of carbonated drinks is leading to a shift towards RTD tea and coffee. Another major driver is surge in the health conscious population who prefer antioxidant property of RTD tea or the instant energy of coffee.”

Companies in the last decade have positioned the RTD tea and coffee market as recreational products, which have proven beneficial in attracting younger population. Advancements in technology and production efficiencies are likely to lead to lower labour costs. Further-more, the focus on high-protein, low-sugar diets is stimulating demand for green tea, ground cof-fee and artificial sweeteners, which have shown strong signs of promise over the past three years.

The top two tea producing nations – China and India, collectively produce about 60% of total global tea output. India is the second-largest tea producer and consumer after China, and fourth largest tea exporter after Kenya, China, and Sri Lanka. The key coffee producing and exporting nations are Brazil, Vietnam, Columbia, Indonesia, Ethiopia, and India, among others. Brazil is the world’s largest producer, exporter and consumer of coffee. Adds Kapadia, “Wider health awareness, a

burgeoning middle-class population with busy lifestyles and increase in disposable income is making more and more consumers opt for RTD tea and coffee. In spite of the deteriorating global economic climate in the last few years, the Hot Beverage sector has remained resilient as improvements in transportation and the extension of the shelf life of products backed by continued product innovation and aggressive marketing initiatives is contributing to the growth of this industry. Some segments like premium and organic coffee and green/herbal tea have created an entirely new market.”

One of the standout features of the expo will be the new technologies on display at the avenue. This, believe the organisers, will enable Indian companies to fulfill their need of investing in modernization and improving quality so as to consolidate gains and improve their global competitiveness. The trade show shall also include seminars with speakers from leading boards, companies and brands. These discussions will offer strategic review of major factors influencing the market e.g. new product developments, consumer trends, packaging innovations, distribution and pricing issues etc. The speakers shall also forecast how the market is set to change and criteria for future success.

In short, WTCE 2013 will serve as the ideal platform not only for showcasing Indian Tea & Coffee brands and technologies but also for International companies to seek market expansion & branding prospects in India. The event will thus serve the twin purpose of acting as a sourcing platform for Indian companies and as marketing avenues for international buyers. The event shall facilitate striking of deals, joint ventures and signing of major contracts. �

A SHOT IN TASTE

India’s per capita tea consumption stands at 711 grams per head dur-ing 2011. However, this is considerably lower than other tea drinking nations such as Ireland (3 kg), UK (2 kg), Turkey, and Iraq, and more than 1 kg in Sri Lanka and Pakistan. This signifies remarkable poten-tial in domestic tea consumption. The domestic coffee consumption too has been continuously growing at annual average rate of 6% and is largely on account of a thriving Independent upscale café culture. Domestic coffee outlets —which have a lot of appeal for the new gen-eration — are set to increase multi-fold within next 3 years. Global players such Starbucks and Dunkin’ Donuts in India can only herald a strong growth trend in future. India, which exports more than two-thirds of its coffee output, grows coffee primarily in its Southern part.

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Ingredients BusinessNovember - December 201226

In 2007, the Indian Agri-Com-modity Federation had pegged

the annual growth of cheese (processed cheese to be precise) at 20% with a total consumption of about 7,000 tons a year. With one of the largest consumer bases in the world, cheese was predicted to be a multi-million dollar industry soon in India.

Today, the market for branded cheese is valued at Rs 400-500 crore, which is exclusing the young cheese (paneer) market that cur-rently stands at a cool 2,000 crore. Though negligible when compared globally, where India’s share is a puny 1%, in India itself, it’s one of the fastest growing markets registering a 15-20% per annum.

The primary factors driving the consumption of cheese in India are the glocalisation of food, increas-ing income and of course the ready availability of different variety of cheese, in easy to use formats (think spread, slices, wedges and even shredded) and awareness. Though still an urban phenom-enon, the appetite of some of the cheeses – cheddar and mozza-rella especially - is growing even in smaller cities and rural areas.

A phenomenon, say experts, that is likely to grow with the coming years. The reason for such an as-sertiveness is not only the growing population and disposable income, but also the taste awarness and the incorporation of cheese into the

daily diet. Lifestyle, say some dairy expert, has been a very big reason to shape up the 600-crore market.

In fact, such is the cheese market today that Gujarat Co-opera-tive Milk Marketing Federation (GCMMF), which owns and markets Amul brand of milk and milk products in India, plans to triple its cheese production capacity over the period of next two years.Amul’s cheese production capacity currently stands at 40 tonne per day, which will be increased to 120 tonne per day. It may be mentioned here that Amul is the market leader in Rs 600 crore cheese market in India with 65-66% market share.GCMMF currently operates one cheese production plant at Khatraj

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ONCE KNOWN FOR ITS YOUNGER CHEESE (PANEER), THE INDIAN MARKET FOR THE SHARP TASTING CHEESE HAS MOVED AHEAD AND HOW. IN THE PAST FEW YEARS, IN-DIA HAS EMERGED NOT ONLY AS THE FATEST GROWING MARKET FOR CHEESE, BUT HAS ALSO DEVELOPED ITS INDEGENIOUS VARIANTS OF CHEDDAR AND MOZZARELLA. TODAY A 600 CRORE WORTH MARKET, IT’S HAS ATTARCTED INTERNATIONAL PLAYERS LIKE KRAFT AND FONTERRA AMONG OTHERS.

The

CheeseCheese

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in Kheda district of Gujarat.

Gowardhan, yet another cheese brand with 35% of the cheese market domination, is now working towards expanding its Cheese folio to include gourmet cheese like Colby and others to suit the Indian market. Likewise for Britannia,

which has tried to capture the market with its healthy offerings.

Top players of branded cheese man-ufacturing in India include Amul, Britannia, Le Bon, Mother Dairy and others. Out of these, Amul has a market share of 65% according to an official of Agri-Commodity

Federation. There are others such as Vita and Vijaya who have a market share in the cheese market but their share is insignificant.

During the last few years, the Indian cheese market has grown steadily at 15 to 20 per cent per an-num according to a market survey quoted in the Indian media. The Australian cheese processor, Kraft, has made an inroad into the Indian market followed by Remia of Hol-land. And most recently, Fonterra.

The urban population accounts for major cheese consumption in India. Taken together, the four metro-politan cities viz., Delhi, Mumbai, Chennai and Kolkata consume over 60% of the total cheese sold in In-dia. Mumbai tops the list with 30%, followed by Delhi at 20%, Kolkota at 7% and Chennai at 6%.

In smaller towns and rural areas, consumers though still prefer non-branded cottage cheese pro-cessed by local dairy owners called “paneer”, the trend is all set to change. Though, experts say, that paneer will still remain the cheese of choice since it’s more economical as compared to branded cheese, a gradual shift is in the cards. People will slowly started preferring cheese in other forms too, like cheddar for instance. Clearly, cheese is all set to become one of the fastest expand-ing market - with rural India as the next target . �

The major cheese consumption in In-dia happens in the four metropolitan

cities, which consume over 60% of the total cheese sold annually

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The drive to the cheese fac-tory of Gowadhan Cheese at

Manchar is a five hour long drive. And yet, reaching to this large establishment can refresh you within minutes. The place, as per the hygiene standards of FSSAI, is squeaky clean and each process, including the making of cheese and yogurt, runs as per schedule. The cheese plant especially is a state of the art centre where most of the applications run through a clever mix of manual labour, technol-ogy and modern-day automation. One of the few reasons that allows Gowardhan to come out with a kilo pack of cheddar and mozzarella cheese in the market, along with large packets of other products.

The plant here produces nearly 40 MT of cheese every day, most of which are supplied to institutions like Dominos, McDonalds, restau-rants and hotels among others. And has a capacity to go double, if the need arises. This is a clever invest-ment since the market for cheese in the coming years will boom up to 450 crore, which is twice the figure of the cheese market in India today – which is 250 crore.

Cover Focus

BARELY TWO YEARS IN THE BUSINESS OF CHEESEMAKING AND GOWARDHAN ALREADY COMMANDS A COMMENDABLE 35% OF THE TOTAL CHEESE MARKET SHARE IN INDIA, WESTERN INDIA BEING THE STRONGHOLD. ALSO KNOWN FOR THEIR FRUITY YOGURT AND INNOVATIVE CHEESE PACKAGING, MADHULIKA DASH SPEAKS TO THE BRAIN BEHIND THE 1000 CRORE COMPANY THAT MADE CHEESE FASHIONABLE, AFFORDABLE AND FLAVOURFUL – DEVENDRA SHAH, CHAIRMAN, PARAG MILK FOOD

Cheese!Go

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But does only having the required capacity in terms of machines and raw material – Gowardhan Cheese gets its major share of its 8,00,000 liters of milk demand from its own farm that has 2,500 specially bred cows – prepares you well for the competition and the hike in demand.

Devendra Shah, Chairman, Parag Milk Foods, gives us a peek into what has sustained Go in the market, the new tech innovation and the use of 100 % veg microbial rennet. Excerpts of the interview…

Give us an overview of how the market for cheese and yogurt shaped over the past few years?

SHAH: There have been two significant changes in consumption patterns, affecting each end of the spectrum. In the mass consump-tion category, Indian consumers are more ready to buy off the shelf. Paneer, which all the major cheese producers are marketing as a brand-ed product these days, has moved out from the traditional realms of being homemade. Secondly, with

greater international exposure, rising incomes and brand affilia-tion; the demand for niche cheese products like Colby has increased. Cheese consumption continues to be an urban phenomenon, with processed cheese and cheese spreads accounting for about 80% of the total cheese consumption. Also, cheese is mostly consumed by children and is yet to be part of the mainstream adult diet on a mass scale.

What made Gowardhan choose cheese as a sector to monopolise over milk?

SHAH: There are many players in the market from Dairy industry but according to our study none of them have focussed on cheese. With changing lifestyle, income and consumer eating pattern and atti-tude, the cheese segment is growing day by day, and will be the one to rule the dairy product roost soon.

What are the new challeng-es in the market today?

SHAH: Apart from the competi-tion of foreign players like Kraft

and Fonterra entering the market, the challenges are more ground level. Like sensitizing the end consumer the nutritional benefits of dairy products. The low price elasticity for dairy products, the need for state-of-the-art distribu-tion network and cold chain, so the food quality isn’t compromised during storage and transit. Back-ward-forward integration from farm to consumer, which would ensure better quality primary ingredients. Development of efficient market-ing channels is also the need of the hour. These aside, a good synergy between the industry, government and infrastructure, a taxation policy on par with other nations and streamlined, transparent food laws is essential for the industry to grow, and flourish.

Are there any plans to di-versify into goat and buffalo milk cheese as well?

SHAH: No, there are no such plans. From the beginning we want to focus on Cows Milk. Our USP of all products is 100% Cows milk and we want to sustain the quality of the products.

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One of the issues with dairy products is the short shelf life. Is Gowardhan looking for newer ingredients that would resolve this issue?

SHAH: It’s all specific to the product in question. Like for few products, we alter manufactur-ing process and for others we care looking for new ingredients. We are amidst bringing out a new product that would resolve some of our issues, but at the moment I will not be able to give you more informa-tion on the same.

What according to you has been the highlight of the cheese industry in India – in terms of product development?

SHAH: Cheese consumption in India is growing. Mozerrala is fast growing segment followed by cheddar.

From making the regular cheddar and mozzarella, you have ventured into making gourmet style cheese. What

has been the driving factor?

SHAH: With the changing life-style, the diversion was to simply cater to the newer, emerging mar-ket. We are already into 6 different gourmet cheeses. Gouda, orange cheddar, mild cheddar, Monetary Jack, Colby and Emental. We would slowly increase our portfolio in the coming years, depending upon the taste.

Given the change in taste and demographics of the Indian consumer, what do you think will be the driving force of the market in 2013?

SHAH: Growing market is the driving force. And market is grow-ing at the rate of 10% per annum.

How is the ingredients market in India as compared to the West?

SHAH: The ingredients market is shaping up rather well in India now than a few years ago. The conversion from unorganized to or-ganized sector is happening slowly, and once it does, this market will

grow exponentially.

What kind of technology did you use to popularise cheese in India? Also, tell us about the different flavours of cheddar.

SHAH: We first made the pro-cessed cheese which suits the In-dian pallet and slowly educated our customers through sampling and BTL activities for different tastes.

A few things that have give foreign brands the good quality is animal rennet in their products. How does Go maintain its cheese quality on par with milk proteins solely?

SHAH: We do not use animal rennet at all and the reason for this is that we have found that using 100% veg microbial rennet gives us the same result. In fact, it works well to keep the taste and flavour of cheese intact. And given our transporting condition, is a big factor. Also, in India cheese is a vegetarian food, so using animal rennet is not possible. �

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Looking Ahead

Circa 1984: Ice cream maker R S Kamath started his first,

self-owned palour called Natural Ice Cream. That 300 sqft shop, then unbeknownst to Kamath, who had broken up from his elder brother’s ice cream business, Gokul Ice Cream, was the start of a burgeoning business – that in little less than a decade surpassed all indigenous brands, including Gokul, to become Mumbai’s, and now slowly India’s ‘truly natural’ ice cream brand. Their USP is the home-style ice cream, a held-to-heart ingredient, and automation. But ask this to Marketing Head and legal advisor Srinivas Kamath, and pat comes the reply “It’s automation.”

“There is no secret ingredient, except fresh fruits and buffalo milk. In fact, we pay extra to agencies to deliver us the best primary ingredients, which also goes through a second run of selection, before being incorporated into the process,” says the Director, Kamaths Ourtimes Ice Cream Pvt Ltd and the marketing brain behind Natural’s expansion to the north of India. In fact, thanks to their consistent quality and new

JUST THREE INGREDIENTS. IN AN AGE WHEN ADDITIVES, STABILISERS AND EMULSIFIERS HAVE BECOME THE ‘NECESSARY’ EVILS FOR EVERY PRODUCT —EVEN THOSE THAT ARE ‘HEALTHY’ — HOMEGROWN BRAND NATURAL ICE CREAM COMES AS SOMETHING OF A GAME CHANGER. MADHULIKA DASH WALKS BACK TO FIND WHAT MAKES THE ICE CREAM TICK IN THE GENERATION OF MULTI-INGREDIENTS PRODUCTS

is the

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Looking Ahead

products, Natural Ice Cream, which in 2011 was 89 franchisees strong is now 111 plus, with their North reach to Raigad. This, says Srinivas, is a part of our plans to set up ‘mega shops’ across India, so that we have a Pan India presence. Though, he insists, that the going is slow, given the huge ‘operational cost’ involved and their highly perishable nature of product.

At present though, most of the Natural Ice Cream palour’s get their daily consignment from their single big factory at Kandivali, which also houses their R&D department, the unit responsible for cultivating new flavours.

For the company that spearheaded the ‘eat natural’ concept in India – even their labelling has only three ingredients stated – what really has been the ace? We caught with Srinivas to scoop out what has made the biggest difference in Natural Ice Cream, and what the year 2013 ahead looks like. Excerpts from the interview:

Is not using any kind of stabiliser and emulsifier, a conscious decision?

SRINIVAS The brand Natural was conceived with the whole idea of giving people something natural to have. So in spite of challenges

that we face in terms of making the ice cream in large quantity, transporting them or the 15-day (maximum) shelf life, we have kept to the ideologies with which the brand was first established. We believe that icecream can be tasteful yet nourishing too, and that’s what we plan to continue. And that’s why even with the rise in price, we have maintained three ingredients only – milk, pharma sugar and fruit pulp. We have taken homemade ice cream and made it commercial – of course without the artificial additives, flavours and preservative.

Shouldn’t adding a natural preservative add more life

to your product that could help you in expansion?

SRINIVAS Yes, it would. In fact, we are on a constant search for a naturally occurring vegetarian preservative that would help us prolong our ice cream’s shelf life, without affecting its taste, texture or creaminess. We do have such preservatives in the market, no doubt. But those are extracted from fish, and as a ‘vegetarian’ product, we cannot use it. As of now, we can maintain the quality because we take our ice cream to the ‘kulfi’ consistency, which is the only known frozen product that can maintain its texture and taste without any additions. Yes, we do

Natural Ice Cream’s founder RS Kamath at the fruit selection unit

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Looking Ahead

have a huge drawback – if there is a change in temperature, our ice creams tend to separate and lose the taste.

Have you heard about Bisin, the naturally occuring preservative?

SRINIVAS Yes, we have. But its effectiveness hasn’t been proven as yet. We do look forward to a similar product in the market. It would also help us, albeit slightly, to meet the growing demand. You see, there is a huge demand for our franchisee, but given the fact that we cannot upscale our production as per demand.

In addition of an extremely volatile shelf life, what are the other challenges of a product like Natural’s?

SRINIVAS To begin with, procuring the primary ingredients like fruits and milk. To keep the quality and the consistency, we had to spend on building our vendors. There is only one milk vendor we take our milk from. It’s a good thing that Maharastra has more buffalo farms than cows.

Even our fruit suppliers are selective, and have been so for the last two decades or so. They come from APMC yes, but we have been able to develop and grow them

to suit our demand more. But eventually, it is all about having a good season. Though, we have increased our vendor’s line keeping in mind the future demand, but that, I am afraid, may not be enough. The other issue of course is sensitising. A lot many times we have had complains, which have been sheer oversight from the servers ‘end. This has been one of the reason that we have slowed down on opening new outlets – be it our own or a franchisee. Also, the kind of machines used for making these ice creams is not easily available. In addition to this, back integration isn’t possible as we are performing all the four functions.

Natural causes are one of the trickiest situations to handle. How have you been able to deal with it?

SRINIVAS Pulping and canning is one way we have been able to ensure that at least one of our primary ingredients is available throughout the season. Thanks to our plant down South, we have been able to efficiently and effectively extract the pulp and store it for as many as six months without any change in the flavour whatsoever. And this includes the trickiest of them like jackfruit, jamun, mulberry and others. In

Mumbai, we have successfully canned alphanoso. We are also working to develop local networks, so when there is a chance of having a bad season, we do have a Plan B to fall on.

We have also diversified to ensure that we are ready to meet the demands in the future. We have also set up a plant in Mangalore, which takes care of our fruit procurement in totality. We have also outsourced the procurement and first level selection of fruits, which has enabled us to concentrate on manufacturing of icecream and its distribution.

As for the machines, we have been able to source out machines that are adept at giving the same result in less than half the time. A perfect example of this is our ice cream churners, that make ice cream in 7-8 minutes flat. The other special machine we have is the spiral freezer that blast freeze each box in matter of few seconds – ensuring that the ice cream is rock solid, ready to be shipped out without any change in flavour or bacteria build up. In one hour it can take 2 tonne of icecream and turn it transport worthy – it works much better than cold freezer. This cuts the storing time by one fourth. And that’s a huge relief.

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Looking Ahead

So you do use preservatives like critic acid to store them for long?

SRINIVAS On the contrary, we use plain cold water to store the pulp that is first cooked at a high temperature and then dunked into the water before being sealed.

Does that ensure that the pulp has the same consistency throughout?

SRINIVAS Every fruit goes through a series of checks before it is put into the pulp making unit. So that ensures that only the best fruit goes in. Rest, the naturally occurring pectin in fruits does it for us.

How about transportation? Doesn’t that pose a challenge?

SRINIVAS: That isn’t as big a worry because of the region specific we deal with. Dry ice and now silicon pads have done a swell job for the moment. Yes, in the coming times we would also be investing in cold containers, and opening new hubs that would act as mini factories that make the popular, fast selling variants.

How do you plan to deal with the growing segment of healthy yogurt and others that may become potential competitors?

SRINIVAS I think as an ice cream manufacturer, we have the first only advantage. But yes, we realise the need to diversify, and have started our own version for less sugar kulfi and milkshake variants – which I would not say are healthier in terms of being low calorie or such, but are as good as our ice creams. Much like our ice creams, the whole process of making the frozen milkshake is done in our factory. Only the last minute churning and serving is left to the outlet.

We in Natural believe in taste first. And with the kind of products we use, health is obviously there.

What kind of support are you expecting from the government and dairy farms?

SRINIVAS Easy availability of loans and a good supply infrastructure and industry conducive rules and regulations. Like take for instance the food safety rules and regulations that no more allows using direct fruits in ice creams, you have to pulp it first. This was one of the reasons that we had to set up a factory larger than what we were supplying around that time, at our own cost. This was also important because ice creams with a below 100,000 bacteria per gram count are the only ones approved for consumption. The fact that ‘ice creams’ still come under a reserved category also doesn’t aid us financially. Most of the expenditure is done by us, which weighs down on us given the kind of investment setting up a good supply chain and a factory demands.

Though the automation has helped us cut down on our wastage by half, which has been a good thing. Today, we plan to become a fully automised plant, where even the filling of packs is done mechanical. This would help us and manage more manufacturing units around the country.

Were there any repercussions of shifting from direct fruit to using pulp?

SRINIVAS There was a little change in the texture, but there was little change in the flavours. In fact, there have been certain flavours that have come out really well like chikoo, coconut, jackfruit and muskmelon. The change of law also initiated the process of using pouches for those fruits like coconut that are more perishable

than others. With pouches, we discovered that we can figure out good and bad fruits. Like for instance, a puffed pouch is a sign of the fruit going bad and it is immediately discarded.

Pulping has also helped us experimenting with different fruits like our banana ice cream is very popular, and has turned out much better than we have expected.

Are there any new flavours in the pipeline?

SRINIVAS We are actually looking at berries like gooseberry, raspberry, mulberry, blueberry in the coming year. The idea is to give people flavours that are unique, just like watermelon and tender coconut ice cream.

What has been the recent addition in terms of automation?

SRINIVAS It’s the filling station, which is still in dry run. The idea of having an automated filling station was one to standardise the process and also resolve the issue of shortage of labour. Also, a filling station makes quality control of the product far easy than when it has human involvement.

Your prediction for ice cream industry the years to come?

SRINIVAS The quality of icecream will be ten times better than what you get today. There will be more innovation both in terms of existing products and new ones. The game, as we say, will belong to the one who implements the best idea first.

As for Naturals, we never knew that we would be able to expand till Jaipur, we did. So, expansion- in terms of products and brand presence is definitely in the pipeline. We are also looking at going organic – starting with organic sugar. �

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41013 DWTC - Ingredients ME - Barter ad batch 01 Ingredients Business maga 175x260 F.indd 1 12/30/12 10:58 AM

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Ingredients BusinessNovember - December 201236

It’s been one of the biggest food and ingredients fests, and its

back! This time bigger, better and more expansive to give better visibility to all kinds of food, and ingredients.

Launched in 1987, Gulfood started as a small yet ambitious event in 850sqm of exhibition space to the region’s burgeoning food and hospitality industry. Today, it offers 113,398sqm of staggering exhibition space to nearly 125 countries to showcase their products. Given its meteoric growth, Gulfood has

in the last 25 years underpinned its position as the world’s biggest annual trade exhibition for the sector with unrivalled expertise, in-depth market knowledge and spectacular return on investment.

Sprawled over 113,398sqm in exhibition space, Gulfood 2013 this time will include an additional tem-porary hall called Zabeel Pavilion, dedicated to food and drink compa-nies due to overwhelming demand both regionally and globally. Under the theme “International Flavours, World Class Business”, Gulfood 2013 is on track to provide export-ers, buyers, exhibitors and visi-tors benefit of even broader trade and sourcing platform as well as knowledge exchange, training, com-petitions and live events. Last year Gulfood attracted 68,681 trade visi-tors from 152 countries – an 11% increase from the previous year – with a 61% international visitor presence. In addition, the 2012 show drew 3,816 exhibitors and offered 110 international pavilions. Consider the growing popularity, Gulfood new addition is a step to-wards facilitating more players to be

a part of this exhibition. In fact, the organisers are expecting participa-tions from countries like Ecuador, Lithuania and Oman.

In fact, the largest pavilion this time will be from France. Speaking on their increasing participation in the expo, François Sporrer, French Trade Commissioner and Director, UBIFRANCE United Arab Emir-ates said, “I am delighted DWTC continues to invest in new exhibi-tion space. At UBIFRANCE, we are inundated with requests from French companies wanting to par-ticipate in this important exhibition and now we can bring more French companies to satisfy the huge market demand for high quality produce and equipment. Gulfood is already the world’s largest annual food and hospitality event and this additional capacity means this is now the largest French pavilion at any food event worldwide.”

Helal Saeed Almarri, Chief Execu-tive Officer, Dubai World Trade Centre, the organiser of Gulfood also said, “The show aims to provide the region’s largest central

Coming Soon

THE EXHIBITION EXPANDS BY MORE THAN 12,500SQM WITH AN ADDITIONAL HALL GCC FOOD IMPORTS PROJECTED TO DOUBLE TO AED195 BILLION IN 10 YEARS. WE PRESENT A PREVIEW OF THE MOST INFLUENTIAL FOOD AND INGREDIENTS EVENTS ON THIS PART OF THE WORLD.

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Ingredients BusinessNovember - December 2012 37

business hub for exhibitors and industry suppliers to experience an unrivalled product and service showcase and the opportunity to meet serious international buyers face-to-face. It is also an exception-al opportunity to source and select from a global product showcase, network with thousands of industry peers to drive the market forward and review the latest trends and in-novations through the entire chain, from raw ingredients and machinery through to finished products and restaurant styling.”

The additional exhibition space this time aims to accommodate the huge demand for participation, enable more processing and packaging equipment space, and allow exhibitors to demonstrate their larger machinery and equipment ranges. This aside, the Ingredients segment too will have a larger space dedicated to them, which will support the region’s increasing drive to manufacture and move up the value chain.

With Dubai a central trading point between east and west, food im-ports to the GCC are projected to rise to USD53.1 billion (AED195 billion) in 2020 from USD25.8 billion (AED94.7 billion) in 2010 according to Economist Intel-ligence Unit figures. In the UAE, imports are set to grow from USD3 billion (AED11 billion) in 2011 to USD8.4 billion (AED30.8 billion) in 2020.

High on Highlights

Keeping in mind the global profile and its importance to exporters, many agricultural and export min-isters are also expected to attend Gulfood to support their countries participation. To facilitate this high level ministerial support, Gulfood is also hosting the Ministers Meet, which is a programme of events where ministers with a portfolio en-compassing global trade, export and agriculture will need to collaborate and broker future trade agreements, export initiatives and food security policy.

Captains of industry and world-renowned experts will also share their research and market analysis at the Food Leaders Summit where food. Also capitalising upon the region’s fast-growing manufacturing base and business start-ups are dedicated programmes for Food Processing and Packaging and Entrepreneur or Foodpreneur where the hottest trends for 2013 will be unveiled. Completing the line-up is the Franchise Workshop, an essential guide to food franchising to help industry professionals make the right decisions to acquire and manage a successful network.

The Gulfood Awards, now in its fourth year, will celebrate the people and companies behind the region’s exceptional food and drink industry. By rewarding and celebrat-ing excellence in 23 hotly contested

categories, the awards aims to recognise and champion innova-tion, the highest levels of service, the very best standards as well as enhancing the region’s internation-al reputation for excellent food and beverage products and services.

The hugely successful and popular Emirates Culinary Guild Salon Culinaire will also be a part of the event this time. Now one of the largest competitions in the world, 1,300 young chefs will compete to become the culinary stars of the future. Organised by the Emirates Culinary Guild and endorsed by the World Association of Chefs Societ-ies, it will be the best showcase of culinary skills and showmanship.

In addition to this, Gulfood 2013 will also host the 3rd Baking & Pas-try Guild Middle East Competition. Designed to honour the highly spe-cialised skills of professional bakers and pastry chefs, the competition has been synonym with unveiling new trends, classical skills, innova-tive techniques, and most of all the exceptional talent, dedication, and competitive spirit of these profes-sionals in the UAE and Middle East. The new categories this year include Retail and Bakery Breads, Retail Bakery Rolls, Retails Bakery Speciality Breads and Retail Bakery Confectionary and Pastry. �

(Want more detail on this trade-only expo, visit www.gulfood.com. Look for more specials in our next issue)

Coming Soon

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Flavours & Fragrance

The flavour industry in India may not be as active as that

globally, but with International Flavours & Fragrance Inc opening its new facility in Gurgaon and the demand for sensory flavours on the rise, thanks to the growing health market in India, the scene is likely to change sooner than expected. Here, we present our round up of the fragrances that will be big on plate in the coming season. Mostly handpicked by experts such as McCormick and Bell Flavors & Fragrances, it is based on the feedback received from customers and manufacturers alike.

On the top of the list are tradition and innovative flavours, especially in the food industry. In fact, US- based flavour company, McCormick’s Flavor Forecast showcases trends and flavours taking root in cultures spanning from Asia, Australia, Europe, Africa, Latin America to North America. High on the notes are Japanese Katsu, a tangy cross between BBQ and steak sauce, and cajeta, a Mexican caramel.

According to Bell Flavors and Fragrances, regional American and regional Mexican and Latin

American flavors will be among the top flavor trends in 2013. Bell Flavors and Fragrances also predict new flavors in beverages based on favorite desserts. The other big driving force will be the health and wellness market, where flavours will be in big demand for functional beverages that have less salt, fat and sugar.

Market analyst, Technomic pick grains, especially high fibre varieties to be the “playing stars on menus.” Thanks to the gluten-free diet, stronger flavours like ramen, udon, soba, rice noodles and fiber-complex grains will show up in soups and various mixed-texture salads.

In fact, given the rise of the health conscious market, experts predict that there would be a rise in sensory flavours, especially that have a palate indulging character to themselves. Like the Decadent Bitter Chocolate, Sweet Basil and Passion Fruit, Black Rum, Charred Orange & Allspice. Also in demand will be rustic and comforting combos like Cider, Sage and Molasses. On the sauces, spreads and jams front, a mix of smoky, spicy and sweet will be in demand,

such as Smoked Tomato, Rosemary, Chile Peppers & Sweet Onion.

One major group that would see flavours innovating is that of healthy eating. The coming year will see a highly personalized, flexible approach to making low caloric food healthy. It would lead to some of the flavours such as Farro Grain, Blackberry and Clove to be rebuilt to suit the palate, along with Market-Fresh Broccoli and Dukkah (blend of cumin, coriander, sesame and nuts) making a comeback.

Bell Flavors & Fragrances has in fact complied two different flavour and fragrance trend lists that will help developers understand consumer demands when launching products in the year to come. The company still believes that consumers’ desire for nostalgic and familiar flavours will be at an all time high, there would be an increase in popularity for Mediterranean and Latin American flavours, especially in beverages. While desserts will still stay in the nostalgic realms of sweet and spicy, the savoury market will see a rise in Latin American and Mexican flavours. �

TO THE CREATIVE USE OF ETHNIC FLAVORS AND HIGH-FIBER INGREDIENTS, PREDICT EXPERTS

Ingredients BusinessNovember - December 201238

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September - October 2012Ingredients Business 27

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Flavours & Fragrance

In an industry dominated by multinational companies, home

brand Sonarome has craved its niche as one of the strongest candidate for new, unique, natural flavours and fragrances. In the business of creating customised flavours and fragrances for both Indian and International market for over three decades now, Sonarome today is reputed for bringing the newest flavours and fragrance first. Here, Nitesh Gulhati, Chairman, Sonarome gives us his take on the current and future of the F&F market.

40 years into the business, tell us how the company has grown to emerge as one of the leading companies in the market?

Sonarome has always been a pioneer in setting standards for the Flavours & Fragrance Industry.

We were the first Flavour & Fragrance Company in India to get ISO & GMP Certified. We have welcomed International Safety & Quality standards, and adopted them voluntarily to compete with Multinational companies.

What has been your most challenging product till date?

Creating a natural flavour or fragrance at market competitive prices can be extremely challenging. Certain fruits such as

watermelon and dragon fruit are best experienced in their natural form. Therefore creating natural flavours of some fruits or flowers are the most challenging aspects for companies such as ours, especially given the evolved sense of taste and smell among people.

How successful have you been in tapping the emerging wellness market?

There are new extracts and supplements available in the market offering an alternative to the earlier chemically synthesised vitamins and minerals. To make these more palatable, companies such as ours have been seeing an increased number of requests to offer flavours and masking agents. In the case of fragrances, the trend has been towards natural essential oils and plant extracts in preparations such as natural creams, cosmetics, etc. The United States, Europe and Japan lead the world in the demand for natural supplements and cosmetics.

What are the key strategies that help Sonarome stay up in the game?

Sonarome is a trusted supplier to its customers in over 45 countries worldwide. The simple philosophy that we follow is to deliver on our commitments with quality, consistency and integrity.

... FOR THE INDIAN MARKETS OF FLAVOURS AND FRAGRANCES TO GROW, SAYS SONAROME’S CHAIRMAN NITESH GULHATI.

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Flavours & Fragrance

How do these strategies drive revenue and market share for the company?

Once you have established yourself as a trusted and reliable supplier, a customer is more likely to be loyal to your brand. Making it easy to do business with us is also vital in ensuring repeated business. We find that focussing on the customers’ needs and going beyond their expectations, is the best way to drive revenue.

What are the drivers and inhibitors in the flavour and fragrance industry today?

The TTM (time to market) of a product has shrunken dramatically. Companies often take a concept and have it on the store shelves as soon as 3 months in some cases. This promptness in delivery has become one of the key drivers in the industry today. With service and quality on the verge of becoming the accepted norm, solution-based sales is the future of most businesses.

However, regulation often plays the role of a double edged sword considered both a drivers and inhibitor. With new regulations and statutory requirements, companies who embrace change will leap forward, whereas smaller players who cannot comply will be left behind.

Which region in India offers the greatest growth opportunities to F&F companies?

Traditionally, Western India (Mumbai) has been the hub for flavours and fragrance in India. However with North India growing as the manufacturing hub to the food industry, most of the recent growth in this segment comes from the these two regions of India. And will continue to be so.

How can innovative ingredients be used to meet demands for lower salt, sugar and fat content in products?

A lot of research has gone into using artificial and natural ingredients to serve a traditionally underserved market. Health conscious consumers as well as ones with medical needs (example diabetes) who were once out of reach are becoming the focus of manufacturers. Ingredients including the right flavour play a vital role in making the product palatable. As the Indian economy grows, our pallets and personal preferences will become more discreet, giving rise to more opportunities.

How do you see the F&F shape in the years to come, and with competitios from foreign brands growing?

Indian F&F companies are growing exponentially, however the growth in more mature markets is considered in line with the industry average. India is yet to experience an exponential growth in the processed food industries as well as personal care segment. The recent government initiative in promoting the cold chain infrastructure in India has resulted in an influx of

frozen foods being available to Indian consumers. But compared with the United States and Europe, India’s cold chain is still in its infancy. But the promotion of cold chains along with the growth of infrastructure and SEZ food parks has given the market of flavours, a healthy boost. And it will continue to experience a healthy growth rate.

Unfortunately, in the personal care and cosmetics industries, the growth is, and will likely, to be limited in part by the high excise duty levied by the government. If this segment of the industry has to experience a rapid growth rate, it must be able to offer these products to the middle class at an affordable price, which is less than the current pricing, which again is 5 -10 times more than the prices of the same products sold anywhere in the world. In a country where manufacturing costs are far lower than most developed countries, the main inhibiting factor is the triple digit excise duty. The old socialist mentality of the government against all products that appear to be luxury items has to change for the growth to happen. Indian companies have shown countless examples of taking a product once meant exclusively for the affluent and repackaging it for the “aam admi.” Shampoo sachets have been a good example. �

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Flavours & Fragrance

The industry may be plagued with an economy slowdown,

but one Sector that has shown remarkable growth is the flavour and fragrance industry. The flavours market in India is estimated to be around Rs 1,200-crore growing at 12 per cent year on year. The Indian flavor and fragrance market is valued at $ 284.2 million in CY 2011 and is expected to grow to $ 380.6 million in CY 2014 at a healthy growth rate of 10.2% which is growing fast ahead at 10% per annum.

In fact, leading market analyst, estimate that by CY 2015, the Indian food industry is expected to reach USD 258 billion from the current level of USD 181 billion, and with this the flavours and fragrance industry too. This trend is expected to continue till 2020, where the industry size is expected to touch USD 318 billion. The reason for this is a favourable government policy for the food industry and a rise in demand by a young consuming class with growing disposable incomes. Clearly the road ahead for the Indian

fragrance and flavours market is rosy. A prove of the same is world leader, International Flavour & Fragrances (IFF) opening its special unit in India. But is India, with its numerous small players, ready for the windfall? Here, Rohit Seth, Joint Secretary, The Fragrances & Flavours Association of India (FAFAI) gives us a peek into what 2013 is likely to hold for the industry. Which product will rule? And how would things change for fragrances and flavours in the coming year?

Given the recent rise in prices of oil and natural products, how do you for see the coming few years will fare for the Flavours and Fragrance (F&F) market in India?

The demand for F & F has surely increased in India in the past few years, and will it continue so. Though the margins have diminished due to the given rise in prices, there has been no shortage in terms of requirements/ volumes. It has been increasing as expected. What has also worked in our favour

is the cost of production, namely, labour, packing material etc, which is cheaper in India and some parts of Asia. So that definitely gives us the edge.

How do you create a balance between rising prices and the client’s expectation?

One of the USP of this industry is its customisation. Most of our formulations are done only on demand. And that gives us the liberty to change it as per the demand and expectation. So instead of using cheaper chemicals, we either change the formulation, or convince the customer to go with the price. And usually given our quality, they relent.

What have been the standout features of the market?

The F&F industry in India mainly comprises of family-owned businesses. The past year though has seen the new generation, who come with the right education, are well travelled and tech savvy, taking over the mantle. Given their

WITH FLAVOURS MARKET PEGGED TO GROW AT 12-15% PER ANNUM AND FRAGRANCES INCHING A CLOSER GROWTH GRAPH, INGREDIENTS BUSINESS GETS A LOWDOWN FROM FAFAI ON HOW WILL THAT MARKET CHANGE SHAPE IN THE YEARS TO COME, AND WHAT HAS BEEN THE MOST EFFECTIVE TREND THAT IS DRIVING THE MARKET TODAY. EXCERPTS FROM THE INTERVIEW...

Rohit Seth, Joint Secretary, FAFAI

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Ingredients BusinessNovember - December 2012 43

Flavours & Fragrance

knowledge and exposure, we are definite to see some technical up gradation in firms, which will play a crucial role in bringing these firms on par with the big players in the market, if not in terms of volumes than in terms of innovation of new flavours and fragrances.

Tell us about the new emerging markets for F&F.

Personal care and hygiene is fast picking up. Also, health food is another area which will soon come into the fore.

What do you think will be the big challenges for the F&F industry in 2013?

Global competition is the major challenge. Most of the MNCs (multi-national companies) have advanced R&D facilities, which India is now upgrading. But the process is slow and ineffective as it isn’t helping us capture new market with the same ease band vigour as the big players. The rise in oil prices is another big issue these days. In addition to this, there is government’s insensitivity towards small and medium scale enterprise, shortage of quality raw material, the unfathomable rise of land and

labour cost and lending rates. Unless, these issues are addressed, the rise in India’s F&F market share globally is still a distant dream.

Your opinion on captive materials and how useful will they be to the growth of the industry?

It is difficult for small and medium scale enterprises to develop their own captives. But there are different ways to maintain monopoly.

In what direction is the Indian F&F market heading towards?

India has unique flavour, which can be explored and put it in world market. Regional diversity and food herein can provide a big source of inspiration. Fortunately, more and more fragrance and flavour makers have awakened to this possibility. And have started exploring new avenues for utilising new fragrances. One of the favourable factors has been the general awareness on the importance of personal grooming. Take the case of car perfumes for instance. A few years ago, such a proposition was non existence. Aroma therapy and customised

home spas are two more significant areas that are being explored by the industry.

One of the reasons for the slow growth of the industry has been the stringent safety regulations both by the governing bodies which bans the use of cheaper chemicals. Has there been any attempt on behalf of FAFAI to revoke some of those regulations?

FAFAI is a lobbying body, and it’s our aim to take up issues plaguing the industry. So the attempt at revoking unfavourable regulations has been our modus operandi. However, I am not yet aware of such a rule, so i would not be in a position to comment,

FAFAI’s vision for 2013 is..

India has become a global player in F&F industry, and it is poised to become a big supplier globally, soon. We at FAFAI are to support the industry and mainly the small and medium scale enterprises, in whatever manner possible. F&F industry will grow in future and poised to play significant role globally. �

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SPECIAL REPORT

Mono- and diglycerides, their derivatives and lecithin

continue to dominate the global food, and feed emulsifier markets while non-food sectors use a wide variety of products. However, the emulsifier sector is currently witnessing changes all over the world, particularly on the supply side, due to the chronic over-capacity. Further, the development of products such as sucrose esters, new types of polyglycerol esters, lecithin-replacers and various emulsifier/stabiliser blends in the food and cosmetic sectors have

added momentum to this market. The current key concerns in the food and cosmetic sectors include impact of GMO and BSE issues, while environment protection is the major issue in many non-food sectors across the world.

The market for food-approved emulsifiers in India is currently dominated by commodity products like lecithin and mono/di-glycerides (DMG/MDG) rather than specialised products such as sucrose esters and Polyglycerol Polyricinoleate (PGPR). Even

important emulsifiers such as Diacetyl tartaric acid ester of mono- and diglycerides (DATEM) and citric acid ester of monoglycerides (CITREM), which find higher acceptance in markets in the west, have little penetration in India. These findings are part of an analysis of the market for food-approved emulsifiers in Asia, covering India, China, Indonesia and Thailand. In addition, Malaysia too has been covered as a major supply country.

The importance of shelf life,

SPECIAL REPORT

INDIANISATION OF PACKAGED FOODS PRESENTS GREAT OPPORTUNITIES FOR EMULSIFIERS, SAYS THE NEW STUDY BY GIRACT. AN INGREDIENTS BUSINESS’ EXCLUSIVE.

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SPECIAL REPORT

organoleptic properties, and essentially, cost-to-consumer are factors not lost on food manufacturers, both retail and food service. The Indian packaged food industry is beginning to mature in its approach to the use of ingredients for the creation of these consumer centric product attributes. Food service too seems to have awakened to the effective use of ingredients for enhancing product value. It’s our estimate that this evolution in the use of ingredients will drive the use of food-approved emulsifiers, among others in the years to come.

According to the previous edition of Ingredient Business, bakery production in India, including breads and biscuits, amounts to nearly 35, 00,000-tonnes. Growth rate is a phenomenal 8% per annum, for what is essentially a staple food in many other parts of the world. The penetration potential for baked goods in consumer markets for packaged foods in India is therefore very high. The heterogeneous nature of this market, with commodity breads jostling for shelf space with whole grain and flavoured breads and introduction of traditional baked staples like roti and parathas in shelf stable packaging, makes it a challenging market for emulsifier manufacturers. In the coming years, up to 80% of bread manufacture and less than 45% of the other baked goods are estimated to be manufactured on an industrial scale. This is another aspect to be considered for increasing penetration of emulsifier usage in baked goods in India. While industrial users are uniformly aware of the usage of emulsifiers

and the relative advantages of different emulsifier types, small and artisanal enterprises still need to be sensitised.

Another area for growth is Chocolates. In India, chocolates have a highly concentrated manufacturer base. Key players are Cadbury-Kraft (Mondelez), Nestlé and Amul. Smaller players like Campco and Morde exist in niche regional and product segments. Various estimates peg the value of the chocolate market between 2000-3200 crores (approximately USD 400 – 650 million). The usage of emulsifiers is therefore going to be dictated by the top three companies. Of these, Cadbury has been first off the line in reformulating its product offerings to suit Indian conditions by increasing the cocoa butter content. Nestlé’ followed suit by reformulating the

ingredients as well as the packaging of Kit-Kat to suit hot and humid conditions in India. Both companies have been successful with this strategy. We have reasons to believe that while lecithin will still hold a place of pride in the chocolate segment, it is possible for other emulsifiers to penetrate this market when appropriate formulation solutions are made available to the chocolate manufacturers. Another unknown issue is the possible fallout of the (scientifically nonsensical) GMO issue with respect to lecithin depending on the source of imports of that product.

While MDG and DMG are popular in stabilizing ice creams, polysorbates are used sparingly here. Some enzymatic solutions are also available for stabilizing ice creams, but their exact penetration within the ice cream sector remains to be evaluated. Enzymatic solutions for emulsifier replacement are also available for the baked goods segment, and are globally an important area of activity for enzyme manufacturers. Many dairy products in India were found to be stabilized with carageenans and alginates, which are marine algal derivatives. Locust bean gum

GiractExclusive

Ingredients BusinessNovember - December 201246

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SPECIAL REPORT

is also a popular ingredient for stabilizing dairy formulations, but less so in India. Greater usage of this plant gum is seen in the west. Ice cream is an interesting segment for emulsifier manufacturers mainly due to the fragmented nature of the product types and manufacturer base. Indian frozen/chilled desserts such as kulfi and shrikhand compete with the traditional ice-creams. Even within the ice-cream space, manufacturers are split between the large players including Unilever and Amul and smaller companies such as Hatsun, Vadilal and others. Food service also

plays an important part in this sector with ice-cream vending being a significant part of the business model of all market participants. Giract’s opinion that this is a key segment is due to the fact that this diversity provides opportunities for emulsifier manufacturers to provide customised solutions to all categories of players. However, this by itself can pose different challenges.

The spreads sector is dominated by the sauces and jams, which reflect

a dispersed and differentiated product sector. Mayonnaise,

cheese spreads and other specialties are insignificant

in India, with penetration restricted

to the major cities only. Among these product categories stabilizing agents like plant gums, algal polysaccharides and pectin are key ingredients.

Emulsifiers of the type covered in the study by Giract were found to be used minimally. In

Mayonnaise and other spreads

the use of ingredients

for emulsification appeared restricted to egg yolk.

Other sectors of packaged foods that can benefit from such advancement include baby food, traditional Indian foods and ready to eat meals. The total market for food emulsifiers in India is second only to China amongst the countries studied, even though both Thailand and Indonesia have a large packaged food manufacturing base. There are many reasons for this phenomenon.

Based on interaction with market players, Giract believes that success in this market is a function of tailoring solutions to the emerging trends and understanding the functionalities of industrialised Indian foods. The main emerging trend is the “Indianisation” of the packaged food product mix. Emulsifier solutions have to be presented for various Indian foods. Further to this, the fragmentation of many of the user sectors is an issue that has to be adequately addressed with greater marketing and application support. �

GIRACT (www.giract.com) is a Geneva-based leading transnational business research and consultancy organisation specialising in food ingredients, additives and related fine chemicals and technologies

Other sectors of packaged foods that can benefit from such advancement include baby food, traditional Indian

foods and ready to eat meals

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“IF THEY DON’T WANT IT, CREATE IT.”

If you ever crossed the power cor-ridors of any big advertisement

agency, you would have heard this little wisdom passed on numerous times to anyone who may have the slightest doubt about the product, the campaign and any of the nit-tygritties.

Seems like some of the creative minds take this wisdom a rather too seriously and resulted in a slew of TVCs that claimed ‘miracles’ way beyond the realm of science and common sense. Like eating breakfast of a particular cereal makes people thinner in weeks. Or another popular drink claiming “provides three time stamina than sadharan chocolate drink”. There were a few assured claims like a well-known health drink claimed to make their consumer ‘taller, stronger, sharper.” The bizarreness of such ‘claims’ even made the food and quality watch dog of India (Read FSSAI) finally shook up and took note. And early week of De-cember 2012, FSSAI sent notices to 38 food companies for mislead-ing advertisements, and now it has initiated prosecution proceedings against 19 of these under the Food and Safety Standards Act. Show-

cause notices have been issued for the remaining companies.

The food regulatory body, which has presented a report to the Parlia-ment on the action taken in these cases, found that the companies manufacturing the food and health products not only made mislead-ing claims in the advertisements but also carried similar ‘claims’ on the packaging. The report showed that the FSSAI had immediately rejected some of the replies to the notices, saying the companies’ claims “cannot be accepted”.

For end consumers, this has came as a huge surge of relief and a prom-ise for ‘better’, ’healthier’ products in the market in the future; for the companies and their products, the wait is on. However, FSSAI’s steps do nudge out many questions that need answers. Like, why only the TVC were targeted? What would be the next step for the companies and FSSAI? Would this garner a change in the labelling and packag-ing law, or would it go beyond the labels and actually take a call on the ingredients used?

While the new product approval law by FSSAI, unrelated to this news of course, has paved the way for better, transparent food leg-

islation, experts are still mum on what effect would this particular advisory have in the coming years. Companies on the other hand have decided not to indulge press – our repeated attempts at getting a reac-tion failed to elicit any response.

Here’s our take on what we think could be the possible outcome of FSSAI’s new action.

• A possible reworking of the packaging and labelling law

• Separate council to approve the products of so called healthy snacks and cereals before they hit the market. The new prod-uct approval law is a step in that direction

• More decisive role of FSSAI and an overhaul of the food safety and quality assurance rules

• More research centres and testing labs for easy analysis and verification of any new claim

• A separate advisory body that would help sensitise people about the role of ingredients in packaged food product

• Finally, transparent laws leading to improved final products. �

Have a perspective on any news, write to [email protected] and we would be happy to carry it on this page

ROUND TABLE

FROM INTRODUCING A NEW PRODUCT APPROVAL LAW TO ISSUING SHOW-CAUSE NOTICE TO 38 TOP BRANDS FOR THEIR MISLEADING TV COMMERCIALS, THE FOOD SAFETY AND STANDARD AUTHORITY OF INDIA (FSSAI) SEEMS TO BE TAKING ON A BIGGER ROLE ON FOOD AND QUALITY CONTROL THESE DAYS. INGREDIENTS BUSINESS REFLECTS ON A POSSIBLE OUTCOME OF SUCH AN ADVISORIES.

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IN NEWS

In what can be called as the governing body’s initiative in

putting a cork on adulteration and making laws more transparent for newer products to enter the Indian market, the Food Safety and Stan-dards Association Of India (FSSAI) has recently introduced rules for new food products entering into the Indian market. This, believe experts, while on one hand will open the Indian market to newer, innovative products, especially in the nutraceutical and functional food segment, will also ensure that the products are safer and suit-able for consumption. In fact, says Prabodh Halde, VP, Association of Food Scientists and technologists, the new rule will work both for the ingredients makers and manufac-turers of packaged food by giving them a better understanding on which product can be used and in what quanitity. This rule, adds Halde, will act as a scan-ning for many new products that are, and will be, making the entry in the years to come. It would

help us keep a tab over ingredients, some of which will be introduced for the first time in India. However, while the prospect of having a rule like this, especially in the wake of ingredients caused illness, looks bright, the main question to be ask is: How far would it help to stream-line the entry of new ingredients in the market? And does that mean that the products will do exactly what the labels claim?

Given that the new rule will require the manufacture to get the prod-uct approved before starting manufacturing, says Halde, will to some extent give FSSAI the

power to ensure that only tested products are allowed in the market, thereby visibly reducing the food related health risks. But we are looking at the broader picture, this rule essentially will open our markets to take advantage of the continuous innovation and research happening in the market. Clearly, the new rule looks like a godsend manna for everyone – ingredients makers, researchers, end users and consumers—but how does it work?

FSSAI NEW PRODUCT APPROVAL LAW WILL OPEN NEW OPPORTUNITIES FOR BOTH INGREDIENTS MAKERS AND FINAL PRODUCT MANUFACTURERS, BELIEVE VP, ASSOCIATION OF FOOD SCIENTISTS AND TECHNOLOGISTS (INDIA), PRABODH HALDE

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IN NEWS

We bring you the essentialities of the new rule.

WHAT IS IT?

The new Product Approval Pro-cedure is for all the NON STAN-DARDISED food products and the products falling under section 22 of the FSSA Act 2006. The number, in India, of such NON STAN-DARDISED products is far more than the products listed in FSS Regulations 2011. It is estimated that over 70,000 food products will require approval, and the number would be much more if nutraceu-ticals and dietary supplements are to be included. Essentially, the new rule from FSSAI will cover all the food business operators who are manufacturing or importing any article of food containing ingre-dients or substances or employing processes or technologies whose safety has not been established. It will also includes any food article containing ingredients or employing technologies which do not have a history of safe use.

As of now, FSSAI has received over 800 applications for product approvals from the food business

operators during a period of little over 8 months. The average time required for obtaining an NOC from the authorities is little over 5 months from the date of submission of the same.

To overcome this delay and to sim-plify the system FSSAI has changed the product approval procedure with effect from December last year.

THE DIFFERENCE BETWEEN THE OLD AND THE NEW

PRODUCTS DIVIDED INTO TWO GROUPS.

The new procedure divides all the products into two broad groups.

Group 1A covers products that are not standardised under FSS Regula-tions 2011, but do not fall under Rule 22 of the FSSA Act 2006.

Group 1B covers all the products falling under the category of nutra-ceuticals, food supplements, health supplements, foods for special nu-tritional requirements, GM foods, Irradiated foods etc.

FORMATS OF THE APPLICATION

Likewise for forms, the new proce-

dure has laid Two different formats for the applications for product approval. These are as follows:

The first is a one page form for products falling under group 1A. This form is used for products con-taining already approved ingredi-ents and additives. No safety data is to be provided.

The other is a similar form as was used in the old procedure for the products falling under group 1B. This is an elaborated form requiring safety data.

USE OF INDIAN FOOD CODE

The new procedure has recom-mended use of the Indian Food Code while applying for product approval. The applicant is required to catagorise the product to the nearest category in the Indian Food Code. This is expected to expedite the process of approvals. Such reference to Indian Food Code was not there in the old procedure

NUMBER OF PRODUCTS IN ONE APPLICATION.

The new procure has restricted the number of products to be covered

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IN NEWS

in ONE application to maximum of 5. These products in same applica-tion should be significantly similar. Such restriction was absent in the old procedure. The application fee is still Rs 25,000 per application but now in the new procedure it works out to be Rs. 5,000 per product.

ACTUAL PROCEDURE FOR APPROVALS

The procedure is divided into two main parts. Products falling under Group 1A are treated separately while those under Group 1B will be in the same way as was prescribed in the old procedure. An attempt has been made to explain these procedures in details.

FOR GROUP 1A

CASE 1 All the ingredients as well as the additives used in the products, are already approved / mentioned in the FSS Regulations 2011 then the authority will issue an Approval directly. No NOC will be issued for such products. No safety data is required provided the product is already in the market prior to 31st March 2012.

CASE 2 All the ingredients used in the products, are already ap-proved / mentioned in the FSS Regulations 2011, but one or more additives are not permitted under FSS regulations 2011, then the au-thority will refer the matter to the Scientific panel / committee and approval / NOC shall be granted on the basis of the decision of the panel / committee. The authority will give adequate weightage in taking the decision provided the product is already in the market prior to 31st March 2012.

FOR GROUP 1B

This group includes the products like dietary supplements, health supplements, foods for special nutritional requirements, GM

foods, Irradiated foods and foods containing botanicals and / or their extracts. This is very large group basically now coming under FSS Regulations. The applicant will have to provide the safety data for the products to support the application. All these products will be issued NOC by the authority. The applicant has to provide the safety data for the products within a period of ONE Year to obtain an approval. This procedure is same as in the earlier rules.

In case the scientific committee recommends additional safety evaluations to be carried out, then the applicant will be charged Rs 25,000 per product for such evalu-ation initiated by the FSSAI in any institute / laboratory competent to carry out such required evaluation.

The application and documenta-tion must be provided with an indexing of the supporting docu-mentation and these documents must be identified in relation to the information code as defined in the application format. In the case of certain documents that are required to be treated as confidential, such documents shall be so stamped and a formal request stating the same

must be provided along with the application. The details of the fees to be enclosed must be mentioned and the application signed by the authorized person.

SUBMISSION OF AN AFFIDAVIT BY THE APPLICANT

The advisory for the new procedure has no mention of an affidavit on Rs.100 stamp paper in the pre-scribed format. It is not very clear whether this requirement of the earlier procedure is still mandatory for submission of the applications. But it is advisable to submit the af-fidavit along with the documents.

THE BENEFIT

The whole process has been simpli-fied and the number of documents required to be submitted are reduced drastically. Here’s a wod of caution for the manufacturers and retailers of anny new product coming into, be it for the purpose incorporation or final distribution: FBO should study Indian Food Code (IFC) and place your product in the IFC and apply accordingly. Halde adds: With this new rule, we expect the new product approval will fuel the innovation. �

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Trend Report

Gone are the days when wine and beer would be evaluated

by their flavourings. Today the driving force for any consumer are the unique and interesting flavour profiles in wine, beer and spirits, as well as new and innovative ways to enjoy these products. Today, the consumer is as interested in what goes into making of the product in their glass as they are in how it’s presented and what it tastes. Call it the rise of evolved audience, taste and knowledge, the market now doesn’t belong to the classic, but the innovatives. Here are a few things that would see a rise in 2013

WINES GO SWEET

The sweet wine trend continues, with varietals including Moscato showing up in table wines and in pink sparklers on menus across menus. Red blends will also proliferate, delivering a range of flavor profiles, many of which skew toward the sweet and medium-

bodied end of the spectrum to appeal particularly to Millennials.

The reason for this, says Donna Hood Crecca, is because sweeter wines appeal more to young adults, which constitutes the biggest drinking profile currently across continents. With nearly all of the 79 million Millennials coming on legal age to consume alcohol and their willingness to explore wine, the explosion of wines with sweeter taste profiles is expected. However, what will be interesting to see is how wine styles, varietals and flavor profiles evolve in the next few years as that powerful demographic gets deeper into the category.

BEER TURNS A FINE DRINK

With the kind of varietals in 2011 and 2012, beer is all set to make its much-anticipated debut on the table in high-end restaurants. 2013 will see extensive beer lists being developed with the same care as

wine lists in upscale-casual and fine-dining restaurants, cour-tesy beer’s food-friendly nature. Though, says Donna, there is a slim chance of beer displacing wine, it would create an incremental growth opportunity!

NEXT-LEVEL CIDERS

Hard cider’s growth is likely to continue, thanks to the broad appeal and food-friendly flavour profiles, increased distribution and marketing support as major supplier companies are now playing in the category. New flavoured varieties will further bolster the category in both retail and restaurant/bar outlets. The smallest yet the most exciting categories in 2013, says Donna.

UNEXPECTED FLAVORS IN UNEXPECTED PLACES

Confectionary flavours in vodka will be big this coming season. The Canadian whisky has

Hot in Beverage 2013FLAVOUS AND DELIVERY FORMATS WILL BE BIG NEXT YEAR, PREDICTS DONNA HOOD CRECCA, SENIOR DIRECTOR AND ADULT BEVERAGE EXPERT, TECHNOMIC

Trend ReportTrend Report

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Trend Report

already taken the lead with fla-vored expressions that has found favoritism among young audience. Rum and tequila, the trendset-ters, will continue to deliver new flavor experiences. The duality of sweet-and-savory and other flavour combinations in vodka will continue. Some of the top flavours in 2013 will be buttered popcorn vodka to cherry and vanilla will be showing up in everything from liqueurs to whiskey. Flavour in-novation will drive several spirits categories in 2013, which should take the cocktail scene in new directions.

NEXT-LEVEL RETAILING

Adult beverage retailing will take an upscale turn, moving from “package store” to “bottle shop” concepts that focus on eclectic spir-its, wine and beer offerings. Hand selling of products and attention to the overall customer experience will be paramount. In-store sipping and sampling proliferates will be in focus. The other trends that would see a rise is:

• Mixers Matter. The quality trend will prompt bar pros to ap-ply the same stringent standards to selecting and showcasing mixers, juice, flavorings, purees, bitters and other drink ingredi-ents as they do to the alcohol

components. Mixers add flavor, texture, volume and balance to cocktails, all characteristics to which today’s consumer is very much tuned in, especially in upscale venues.

• Drinks on Tap. Taps aren’t just for draft beer anymore! Innova-tive dispensing systems will be the latest thing for upscale bars and restaurants. Cocktails can present some challenges due to the mixers, juices and sweeten-ers involved, but we’re seeing more spirits on tap in bars around the country.

• Going Digital. Wine, cocktail and beer lists presented on digi-tal tablets with food-pairing sug-gestions in bars and restaurants are all in, 2013 will see stores have in-store tablets and digital kiosks that will provide product details, ratings and serving sug-gestions at retail. Smartphone apps, along with QR codes on everything from packaging to menus, also immediately con-nect consumers to interesting drink information will also be big. The key here will be know-ing your clientele and their level of engagement with tablets and other digital formats, or under-standing whether leveraging such devices will broaden your concept’s appeal. There is the

investment factor to consider, as well. But the wealth of informa-tion the can be put at consum-ers’ fingertips can further engage them at the point of sale, which is really exciting.

• Beer Gardens, for indoors and out. The communal experi-ence of the beer garden goes beyond the major markets. The hottest trends in beer, food and socialising come to life in large open spaces—both indoors and outside—devoted to the casual enjoyment and exploration of beer and food. Beer gardens have already shown up in markets from New York to New Orleans and beyond.

• Whiskey Wows. From whiskey-flavored liquors to flavored whis-keys, from single barrel bourbons to new takes on rye, whiskey’s appeal will continue to grow. Says Donna, “We’ve tracked volume increases in all categories of whiskey, with the exception of American blends and Canadians. But we’re seeing innovation in those categories, such as flavored and aged whiskeys in the Cana-dian category. Others that are really gaining momentum are rye, bourbon, Irish and single malt Scotch, each of which de-liver varying levels of complexity on their flavor profiles. We see great opportunities to tie whiskey to food, and also see its appeal continuing to expand beyond the traditional whiskey drinker.” �

Note: The review is based on ongoing research into spirits, wine and beer volume and sales, as well as surveys, interviews and discussions involving brand marketers, on-premise and retail operators, bartenders and consum-ers, these insights are supported by Technomic’s extensive adult beverage database reports and other tools, such as MenuMonitor.

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