value chain analysis: juices
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VALUE CHAIN ANALYSIS: JUICES INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Submitted by: CBI Expert Team: Bastiaan Bijl and Kuldeep Sharma NCCSL Team: Buddika Mallaawarachi & Patali Karunarathne Commissioned by Co-financed by : VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Table of Contents 1. 2. 3. 4. 5. 6. Background ............................................................................................................4 1.1 Project Framework Background ............................................................................. 4 1.2 Objective and Scope of the Study .......................................................................... 4 1.3 Methodology of the study ..................................................................................... 4 Status of the industry .............................................................................................5 2.1 Company overview .............................................................................................. 5 2.2 Main products ..................................................................................................... 5 2.3 Brands on the market .......................................................................................... 6 2.4 Processing and packing technology ........................................................................ 7 2.5 Fruit base .......................................................................................................... 7 2.6 Fruit concentrate/juice imports ............................................................................. 8 2.7 Juice exports ................................................................................................... 10 2.8 Import duty structure ....................................................................................... 11 Demand trends and opportunities on the Indian market ......................................13 3.1 Market characteristics and trends ....................................................................... 13 3.2 Packaging trends .............................................................................................. 14 3.3 Geographical trends .......................................................................................... 14 3.4 Outlook ........................................................................................................... 14 3.5 International trade ........................................................................................... 15 3.6 Indian market access requirements .................................................................... 17 3.6.1 Duties ...................................................................................................... 17 3.6.2 Non-tariff measures ................................................................................... 19 Demand trends and opportunities on the European market .................................21 4.1 Market characteristics and trends ....................................................................... 21 4.2 EU market access requirements ......................................................................... 23 Structure of the chain ..........................................................................................25 5.1 The value chain map ......................................................................................... 25 5.2 Actors and influencers in the chain – roles & functions ........................................... 26 5.3 Economic analysis of the chain ........................................................................... 30 5.4 Bottlenecks in the chain .................................................................................... 31 5.4.1 Farm Inputs Level Bottlenecks ..................................................................... 31 5.4.2 Input Collection Level Bottlenecks ................................................................ 32 5.4.3 Processing Level Bottlenecks ....................................................................... 32 5.4.4 Export Level Bottlenecks ............................................................................. 32 Competitive assessment of the Sri Lankan juice industry .....................................33 6.1 Comparison parameters .................................................................................... 33 6.2 Analysis .......................................................................................................... 33 www.cbi.eu/disclaimer 2 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 6.3 7. Conclusions on Sri Lankan competitiveness .......................................................... 34 Recommended strategy for upgrading the juice value chain ................................35 7.1 Vision statement .............................................................................................. 35 7.2 Strategy ......................................................................................................... 35 7.3 Rationale ........................................................................................................ 36 8. Proposed programme interventions for upgrading the value chain ......................37 9. Final recommendations ........................................................................................39 Annex I: Overview of key players ...............................................................................40 Annex II: Overview of key Influencers/Stakeholder Institutions ................................42 Annex III: Attendants at the Stakeholder Workshop, 6 November 2013 .....................44 Annex IV: Persons Contacted ......................................................................................46 Annex V: HS Codes simplified .....................................................................................49 www.cbi.eu/disclaimer 3 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 1. Background 1.1 Project Framework Background SAARC-TPN: The 8 member states of SAARC have taken the initiative to move towards further integration and intra-trade promotion and setup the SAARC TPN collaboration between 28 trade promotion and SARRC integration bodies across the region. The TPN, with support from the Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) GmbH on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ) has built an information sharing platform at www.saarctrade.info. High Priority Sectors for Trade Promotion between SMEs across SAARC: Working further towards actual trade promotion, the TPN has established a SAARCSME Working Group which focuses on trade development between SMEs across the SAARC region. In this direction a detailed study was conducted to identify highpotential export sectors taking specific consideration of an inclusive approach i.e. further enabling the smaller economies in the SAARC region as well as focusing on SME exporters. The juice industry was identified as one of the key priority export sectors within SAARC. The TPN also aims to seek further opportunities for SAARC based SMEs in the EU market. The EU remains an important and dynamic market for the juice sector offering multiple niche opportunities for smaller players from the developing world. 1.2 Objective and Scope of the Study The study that was initiated in July 2013 by SAARC-TPN SME Working Group in Nepal (FNCSI) and Bhutan (BCCI), the Sri Lanka (NCCSIL) component commenced in August. The study was conducted in collaboration with CBI, Netherlands (www.cbi.eu) f i n a n c e d b y A u s A I D & B M Z , based on desk research and a field study across Nepal, Bhutan, Sri Lanka and India, the study had the following objectives: (1) to provide a realistic indication of export potential, (2) to assess the most important constraints along the value chain constricting export, (3) to define intervention areas and activities for value chain upgrading by GIZ, CBI and other donor agencies, and (4) to assess how proposed interventions contribute significantly to export growth. 1.3 Methodology of the study The study report was prepared in four phases. At first desk research was conducted to review and analyse existing VC promotion studies and other reference materials (Annex I) in order to develop a draft value chain analysis report containing a list of potential exporters of fruit juice in Sri Lanka; draw up a value chain map showing the main stakeholders at micro and meso levels with the functions performed and descriptions of link to these stakeholders; and assess the main advantages and constraints which the exporters are facing. Field studies were conducted in and around Colombo, during which several companies and institutions were interviewed. At the third stage a stakeholder’s workshop was conducted in Colombo during which much data was collected via the co-assessment of issues and proposed solutions across the chain. At the end, a final report was prepared incorporating feedback received from the participants of this workshop. www.cbi.eu/disclaimer 4 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 2. Status of the industry 2.1 Company overview In the Sri Lankan juice industry (including coconut-water) there are 4 large players, 45 medium players and around 40-50 small players (including several that only operate on a seasonal basis). Of the four large players, one is a global multi-national (Coca Cola). Very recently two large Indian companies have also installed major operations in Sri Lanka with the primary purpose of supplying the South of India from Sri Lanka’s strategic location and attractive investment climate. Large players: • • • • Expolanka (Pvt) Ltd Lanka Canneries Ltd Cargills (Ceylon) PLC Coca-Cola Beverages Sri Lanka Ltd Large Indian players: • • Dabur Lanka (Pvt) (installed capacity 280,000 cases per month), Tunip Lanka Ltd. (installed capacity 240,000 cases per month) Small to Medium Players: • • • • • • Edinborough Products [Pvt] Ltd Country Style Foods (PVT) LTD. CIC Holdings PLC Kelani Valley Canneries Ltd Lanka Dairies Pvt Ltd Pristine Kokos Pvt Ltd 2.2 Main products A full range of juices, nectars, fruit drinks and fruit squashes are produced in Sri Lanka with the majority of production hovering around the juice drink/nectar definition zone. Juice parlours also exist and own-brands have been developed for some of these. Cordials (alcoholic fruit liqueurs) are also being produced on a small scale. Backward linkage into Sri Lanka’s rich fruit base is still very limited. Sri Lanka is particularly prized for its pineapple which is sought after in the juice world for its taste and colour properties. Besides pineapple, the major locally pulped fruits include passion, mango, guava, papaya (small quantities), pineapple, lime, mixed fruit and of course coconut-water. Other juices commonly found on the market, produced from imported concentrates, include mango, apple, orange, pineapple, lychee, pomegranate and mixed. In terms of product packaging, canned juices still exist. Tetra-pack in 200ml, 1Ltr sizes and PET in 200ml, 250 ml, 500ml and 1Ltr from the medium to large sized players. Most of the small players use glass bottles. This is also a response to the market showing an interest in seeing the juice, particularly the colour. Many consumers are also interested in keeping the bottle for other purposes after consumption. Aseptic pulps and frozen pulps are packed in the internationally standard 270 kg aseptic packs (inserted in a drum). www.cbi.eu/disclaimer 5 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 2.3 Brands on the market Tabel 2.1: Overview of the brand in the market and retail prices # Manufacturers Name Brand Name Product Name Type of Packaging Quantity Rate RUPEES Country of Origin Kist Kist Kist Kist Kist Kist Kist Kist Kist Kist K Choice K Choice K Choice K Choice K Choice My juice My juice My juice My juice My juice My juice Smak Smak Smak Smak Smak Smak Orange & Mango Lemon & Mint Woodapple nectar Mango Nectar Mixed Fruit Mango & Passionfruit Mango & Passionfruit Mixed Fruit Orange Nectar Wood Apple Mango Nectar Mixed Fruit Passion Fruit Nectar Mixed Fruit Mango Nectar Orange Nectar Mango Nectar Apple Nectar Mixed Fruit Mango Apple Mixed Fruits Orange Woodapple Woodapple Mixed Fruit Orange Pet Pet Pet Pet Pet Pet Pet Pet Pet Pet Pet Pet Pet Pet Pet Tetra Tetra Tetra Tetra Tetra Tetra Tetra Tetra Tetra Pet Pet Pet 200ml 200ml 200ml 200ml 200ml 200ml 1l 1l 1l 1l 200ml 200ml 1l 1l 1l 200ml 200ml 200ml 1l 1l 1l 200ml 200ml 200ml 500ml 500ml 500ml 50 50 50 50 50 50 220 210 210 210 45 45 195 195 195 45 45 45 200 200 200 40 40 40 40 40 40 Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri Sri LOCAL BRANDS 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Cargills Agrifood Cargills Agrifood Cargills Agrifood Cargills Agrifood Cargills Agrifood Cargills Agrifood Cargills Agrifood Cargills Agrifood Cargills Agrifood Cargills Agrifood Kelani Valley Canneries Kelani Valley Canneries Kelani Valley Canneries Kelani Valley Canneries Kelani Valley Canneries Lanka Diaries Lanka Diaries Lanka Diaries Lanka Diaries Lanka Diaries Lanka Diaries Country Style Country Style Country Style Country Style Country Style Country Style Pack Pack Pack Pack Pack Pack Pack Pack Pack Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka Lanka INTERNATIONAL BRANDS 27 Del Monte Asia Del Monte Prune Pet 945ml 1130 USA 28 Copa Syndicate Hale & Hearty Orange Bottle 1l 545 Turkey 29 New Sevegep Fontana Cranberry Tetra Pack 1l 436 Cyprus 30 New Sevegep Fontana Grapes Tetra Pack 1l 436 Cyprus 31 New Sevegep Fontana Lemon Tetra Pack 1l 436 Cyprus 32 New Sevegep Fontana Pineapple Tetra Pack 1l 436 Cyprus 33 New Sevegep Fontana Peach Tetra Pack 1l 436 Cyprus 34 New Sevegep Fontana Apple Tetra Pack 1l 436 Cyprus 35 Sunnyland Ocean spray Cranberry & Blackcurrant Tetra Pack 1l 649 Belgium 36 Sunnyland Ocean spray Cranberry & Raspberry Tetra Pack 1l 649 Belgium 37 Berri Berri 2.4l 1235 Australia Berri Berri Apple & Blackcurrant Apple Pet 38 Pet 2.4l 1155 Australia 39 40 Berri Berri Berri Berri Apple Orange Pet Pet 1l 1l 575 635 Australia Australia 41 Parle Agro Frooti Mango Pet 250ml 145 India 42 Parle Agro Frooti Mango Pet 1l 470 India 43 44 45 Parle Agro Dimes Gld San Dimes Gld San Frooti Dimes Dimes Mango Berry Apple Pet Tetra Pack Tetra Pack 2l 1l 1l 850 479 479 India Turkey Turkey 46 47 Dimes Gld San Dimes Gld San Dimes Dimes Orange Pomegranate Tetra Pack Tetra Pack 1l 1l 479 845 Turkey Turkey www.cbi.eu/disclaimer 6 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Picture 2.1: Labels from other bottled brands on the market 2.4 Processing and packing technology Some processors are equipped with state-of-the-art hot-filling and tetra-pack lines. Some medium-sized processors employ largely manual bottling. Large players have their own pulping units. Pulping at source is still in its infancy. 2.5 Fruit base Table 2.2: Production of Fruits – MT, Ha 2011/12 (Existing and Bearing Extents in Hectares, Production in Metric Tons) Banana Existing Bearing 32,420 24,952 Papaw Existing Bearing 3,275 2,256 Butter Fruit Existing Bearing 970 696 Guava Existing Bearing 764 501 Production pockets Banana Mango Rambutan Pineapple Pawpaw Lime Orange Woodapple Pomegranate Melon Guava Production 250,027 Production 28,295 Production 2,680 Production 2,551 Pineapple Existing Bearing 4,531 4,319 Mango Existing Bearing 9,608 6,543 Lime Orange Existing Bearing 5,350 3,298 Pomegranate Existing Bearing 467 193 Production 38,403 Production 72,955 Production 29,277 Production 3,423 Passion Fruit Existing Bearing 584 388 Rambutan Existing Bearing 4,073 3,126 Woodapple Existing Bearing 749 360 Melon Existing Bearing 491 523 Production 2,399 Production 46,461 Production 9,822 Production 3,360 Monaragala(U), Hambantota(S), Kegalle(Sab), Puttalam(NW), Anuradhapura(NC) Puttalam(NW), Hambantota(S) Kegalle(Sab), Gampaha(W) Gampaha(W) Hambantota(S), Monaragala(U), Anuradhapura(NC) Monaragala(U), Puttalam(NW) Hambantota(S) Hambantota(S) Monaragala(U) Gampaha(W) Source: Ministry of Agriculture As the table above shows, Sri Lanka has an abundance of fruit production offering much potential for backward linkage in the juice industry. Pineapple, mango, banana and papaya are produced in sizeable volumes and, importantly, there are certain production pockets where production is geographically concentrated. Mango varieties www.cbi.eu/disclaimer 7 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA are not the same as the prized Alphonoso in India for its flavour, but a couple of varieties are similar to the Indian Tota Puri which is large with small seeds, and offers extensive flesh for pulp production. Tota Puri is used primarily as a (mango) filler. As consumption keeps expanding in the fruit flavoured drinks category in India, which constitutes over 80% mango, and the intensive price competition amongst major brands to reach the masses continues apace, a shortage of mango pulp supply at affordable price is imminent. This represents an opportunity on which Sri Lanka could capitalise (this would require large scale investment though to rapidly bring Sri Lanka up to the required scale). If a niche market for exotic flavours like wood apple could be developed abroad beyond the current Sri Lankan diaspora market, 10,000MT of wood apple is also a significant base of exotic fruit supply. Rambutan production is also adequately significant to cater for niche markets. 2.6 Fruit concentrate/juice imports Table 2.3: Fruit Concentrate Imports 2012 Code Product label Imported quantity Unit Main Origins '20091900 Orange juice, Brix value <= 20 at 20°C 855,921 Kg '20097900 Apple juice, Brix value > 20 at 20°C, 724,272 Kg '20098090 Other juice 666,350 Kg IND, UAE, DNK,CYP '20091190 Frozen orange juice 418,690 Kg UAE, PAK, SNG, BRA '20097100 Apple juice, Brix value <= 20 at 20°C 162,370 Kg CYP, GER, PAK Frozen orange juice Of a Brix value of 60 or more , in bulk packaging of 270 kg or more Kg PAK, BRA '20091110 158,760 '20096900 Grape juice, Brix value > 30 at 20°C 91,002 Kg AUS, CYP , PAK, '20091200 Orange juice, Brix value <= 20 at 20°C 72,774 Kg CYP, GER '20093900 Single citrus fruit juice, Brix value > 20 at 20°C, 68,948 Kg DNK, MLY, CHN '20095000 Tomato juice 52,742 Kg UAE, CYP, TUR '20094900 Pineapple juice Brix value > 20 at 20°C 43,940 Kg UAE, CYP, TUR, SNG www.cbi.eu/disclaimer DNK, AUS, UAE, CYP DNK, UAE, CYP, CHN 8 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA '20098010 Passion juice 31,151 '20096100 Grape juice, Brix value <= 30 at 20°C 30,933 '20098990 Juice of fruit or vegetables (detailed label not available) 22,551 '20092100 Grapefruit juice, unfermented, Brix value <= 20 at 20°C 8,164 '20098910 Juice of fruit or vegetables, (detailed label not available) 5,400 '20094100 Pineapple juice, unfermented, Brix value <= 20 at 20°C 5,040 '20092900 Grapefruit juice, unfermented, Brix value > 20 at 20°C 1,434 Kg UAE, DNK Kg CYP Kg DNK, THA, UAE Kg CYP. GER Kg DNK Kg CYP Kg Source: ITC Trade Map In order to follow the Sri Lankan HS code better, the clarification table in annex V is needed. It should be noted however that the coding is in transition so the data is still showing older coding than the 2013 code listed in the annex. The category 20098090 therefore still shows in the data even though the code has been cancelled. It is also important to note that the codes for mango pulp and concentrate have been newly created and hence it is probably safe to assume that the majority of 20098090 imports is likely to have been mango pulp and concentrate. Furthermore, the separation of juices from concentrates is also recent so the data in the above table includes final juice products (not concentrate) under the less than x brix categories e.g. orange juice =<20 brix. Lastly, it is important to note that the codes for passion and tomato juice do not distinguish between concentrated forms and juice forms. Orange and apple dominate but passion, pineapple, grape and tomato are not negligible. It is to be expected that imports of concentrates will experience a very rapid increase in years to come as the two large scale Indian establishments start to upscale their operations. As is clear from the above table, significant quantities of concentrate are also imported in frozen form. www.cbi.eu/disclaimer 9 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 2.7 Juice exports Table 2.4: Fruit juice exports 2012 Code Product label Exported quantity, Kilograms Main Destination '20098090 Preparations of vegetables, fruit, nuts or other p: Fruit juices and vegetable juices, unfermented and: Coconut water NL, GER, IND, MLD '20099000 Mixtures of fruit juices 236,872 IND, USA, FRA, MLD '20094900 Pineapple juice, Brix value > 20 at 20°C 233,894 FRA USA '20091900 Orange juice, Brix value <= 20 at 20°C) 205,405 IND, CYP '20092900 Grapefruit juice, Brix value > 20 at 20°C 30,675 IND, MLD '20098010 Passion juice 16,960 GER, MLD, IND '20096900 Grape juice, Brix value > 30 at 20°C 3,798 PAK, UK '20093100 Single citrus fruit juice, unfermented, Brix value <= 20 at 20°C 2,080 '20091190 Frozen orange juice 1,796 AUS '20098990 Coconut water 1,504 AUS, CAN '20097900 Apple juice, Brix value > 20 at 20°C 1,173 1,167,545 UK Source: ITC Trade Map Sri Lanka’s leading export is coconut-water, all be it still quite a small quantity of just over 1,000 MT. The Netherlands and Germany are important destinations. Mixed fruits (including guava pulp), pineapple and passion concentrates are also exported, but still in small volumes. The above table will also include re-exports particularly where India is a main destination as it is likely that Indian firms operating in Sri Lanka will buy large bulk orders at discounted rates and re-distribute to other plants in India. Looking at total exports and imports since 2005, imports have shown a continuous rise whilst exports dipped to an all-time low point in 2008 and 2009; thereafter exports gradually increased once more. This trend appears to correspond with Sri Lanka’s civil war. Whilst volumes of exports are declining again, values are not. This is most likely to be explained by coconut-water attaining continuously increasing prices. It is probably best not to read too much into the numbers however since the total volumes are still very small. The same applies for exports to India which have fluctuated between 50% and 10% of total exports (especially when it is hard to separate concentrate and juice categories in the data). www.cbi.eu/disclaimer 10 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Table 2.5: Import and Exports over 2005- 2012 IMPORT 2005 2006 2007 2008 2009 2010 2011 2012 $M 1.2 2.2 3.9 3.5 3.5 4.2 4.7 5.5 MT 1,873.7 2,672.7 3,235.2 2,550.5 2,664.7 3,181.5 3,323.1 3,942.5 2005 2006 2007 2008 2009 2010 2011 2012 4.1 3.8 2.3 1.0 1.1 3.1 2.6 3.1 525.9 383.1 4,473.2 2,665.5 1,881.2 EXPORT $M MT 408,015.9 2,730.6 1,294.8 Source: Calculations from ITC Trade Map www.cbi.eu/disclaimer 11 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 2.8 Import duty structure Table 2.6: Import Duties for Juices and Concentrates H.S. Code 200899 Description (3) Mango pulp/concentrate Orange juice : 2009.11 Frozen : 2009.11.10 Of a Brix value of 60 or more , in bulk packaging of 270 kg or more Other 2009.11.90 2009.12 2009.19 2009.21 2009.29 2009.31 2009.39 Not frozen, of a Brix value not exceeding 20 Other Grapefruit (including pomelo) juice: Of a Brix value not exceeding 20 Other Juice of any other single citrus fruit : Of a Brix value not exceeding 20 Other Pineapple juice : 2009.41 Of a Brix value not exceeding 20 2009.49 Other 2009.50 2009.61 2009.69 Tomato juice Grape juice (including grape must) : Of a Brix value not exceeding 30 Other Apple juice : 2009.71 Of a Brix value not exceeding 20 2009.79 Other 2009.80 2009.80.10 Juice of any other single fruit or vegetable : Passion 2009.80.90 Other 2009.90 Mixtures of juices www.cbi.eu/disclaimer Customs Duty Pref. Gen. (4) (5) Unit of Qty. (6) VAT (7) PAL (8) Rates of Other Levies SUR Cess (10) (11) NBT 35% or Rs. 2% 80/= per kg Free 30% kg 12% 5% (PK)Free 30% kg 12% 5% 2% (PK)Free 30% kg 12% 5% 2% 30% kg 12% 5% 2% (PK)Free 30% kg 12% 5% 2% (PK)Free (SF)17.5% (SD)5% 30% kg 12% 5% 2% (PK)Free 30% kg 12% 5% 2% (PK)Free (SF)17.5% (SD)5% 30% kg 12% 5% 2% (PK)Free 30% kg 12% 5% 30% kg 12% 30% kg 30% (PK)Free (SF)17.5% (SD)5% (PK)Free (PK)Free (SF)17.5% (SD)5% (PK)Free (SF)17.5% (SD)5% (PK)Free (SF)17.5% (SD)5% (PK)Free (SF)17.5% (SD)5% 35% 60/= 35% 60/= 35% 60/= or Rs. per kg or Rs. per kg or Rs. per kg 35% 60/= 35% 60/= or Rs. per kg or Rs. per kg 2% 35% 60/= 35% 60/= or Rs. per kg or Rs. per kg 5% 2% 35% or Rs. 60/= per kg 12% 5% 2% kg 12% 5% 2% 30% kg 12% 5% 2% 30% kg 12% 5% 30% kg 12% 30% kg 30% 35% 60/= 35% 60/= or Rs. per kg or Rs. per kg 2% 35% 60/= 35% 60/= or Rs. per kg or Rs. per kg 5% 2% 35% or Rs. 60/= per kg 12% 5% 2% 35% or Rs. 60/= per kg kg 12% 5% 2% 30% kg 12% 5% 2% 30% kg 12% 5% 2% Excise (12) ICL/SLS (13) 35% or Rs. 60/= per kg 35% 60/= 35% 60/= or Rs. per kg or Rs. per kg 12 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 3. Demand trends and opportunities on the Indian market 3.1 Market characteristics and trends Whilst juices are not an important drink in India compared to milk and tea and per capita consumption of juices is remarkably low, numbers are still significantly large because of the sheer size of the Indian population. The total juices market adds up to 1,665 billion litres of which 100% fruit content juices make up 2% and nectars 10%. All three categories have been showing a rapid rate of increase over the last three years, highest in the case of nectars. As the table below shows, these rates are expected to cool off a bit but remain in double digits. This rapid growth is driven by increasing incomes across the country but at the same time is occurring at the expense of the carbonated drinks category which is slowly losing its appeal among health-conscious consumers, especially in urban India. There has been a shift in consumer beverage demand towards non-carbonated alternatives thanks to obesity and other health issues, changes in lifestyle and affordability, and increased presence of organised retail in urban areas. OVERVIEW OF JUICE CATEGORIES FRUIT FLAVOURED STILL DRINKS (FFSD) • • • • • • • • • • • • ≤24% fruit content lowest priced of the three categories (c.Rs. 65/ltr) 1,473 mln ltrs consumption Highly dominated by mango (83%) Rural preference because of long shelf life and price CAGR 2009-12 17.5% CAGR 2012-15 14.8% Per capita consumption 1.65 ltrs/yr (global average 12.1) Innovative packaging and reducing pack size to meet the needs of the masses Fierce competition between big players Main market share holders - Coca Cola (46.2%), Pepsi (25.5%) Parle Agro (16.6%) Retail channel predominantly traditional and rural NECTARS • • • • • • • • 25-99% fruit content Per capita consumption 0.19 ltrs/person/yr (J&N) Global average per capita consumption 6.1 CAGR 2009-12 19.6% CAGR 2012-15 15.3% Orange, apple and mango are the leading flavours Main market share holders - Dabur (58.6%), Pepsi (32.7%) Retail channel mostly urban and traditional, some modern JUICES • • • • • • 100% fruit content Per capita consumption 0.19 ltrs/person/yr (J&N) Global average per capita consumption 6.1 CAGR 2009-12 18.1% CAGR 2012-15 14.6% Upper-middle- and middle-income consumers are targeted as potential consumers • • Orange is a leading flavour followed by apple Exotic flavour options, such as cranberry, lychee and pomegranate, are becoming increasingly popular. Mixed fruit and vegetable juices are also being increasingly consumed for their health value www.cbi.eu/disclaimer 13 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA • • • 3.2 Frozen and Not from Concentrate (NFC) juices are virtually non-existent in India despite their popularity in other Asian countries. This could be explained by the availability of traditional freshly pressed juice on fruit carts whereby consumers would opt for this traditional source instead Main market share holders - Pepsi (56.1%) Dabur (34.5%) Retail channel mostly urban and traditional, some modern (modern trade largest in this category). Packaged fruit/vegetable juice is still a very urban concept and the challenge will be to take this product into rural India. In rural parts of the country consumers still purchase juices from street juice markets where juices are freshly-prepared. The most common street fruit juices are orange and sugar cane. Packaging trends In the juice and nectar sector, tetra-pack packaging is very dominant, taking up 95% of packed juices; the FFSD category uses 56% PET bottle and 19% tetra-pack (Compass Packaging Suppliers 2012). Companies, such as Parle Agro and Coca Cola, are introducing very innovative PET formats in packaging, especially in rural areas to reduce breakage. Parle has recently launched a 90ml triangular pack priced at Rs5, to drive rural penetration, and sales in smaller outlets. Coca-Cola has just introduced a 100ml “pillow pouch” for Rs.6 that can hang in tear-off strips in grocery stores. 3.3 Geographical trends A geographical shift in processing and packaging of juice from imported concentrates is ongoing in the SAARC region. Indian firms that are more dependent on imported concentrates are seeking to circumvent the high import duty and excise barrier that is imposed by India on imported concentrates. The purpose of this barrier is to protect India’s mostly small fruit pulp and concentrate producers. Large Indian processors are finding attractive investment climates in other SAARC countries along with some other benefits such as lower costs of water treatment and sea freight. Large setups in Nepal and more recently in Sri Lanka are strategically placed to supply the North of India from Nepal and the south of India from Sri Lanka. The tetra pack plants have a capacity of around 250,000 cases per month (12 tetra packs fit in a case – both in 1ltr and in 200ml). The Dabur and Tunip Lanka establishments in Sri Lanka are now just starting operations. In Nepal, Dabur has shown a steep climb in its production and export to India over recent years. It is worth noting also that across a big stretch of North India there are no juice processing and packing plants. Hence Dabur Nepal is very strategically placed. Unconfirmed reports suggest that Bhutan is also being considered as a destination to setup larger plants and supply the Northern Indian market. 3.4 Outlook Consumers of 100% juices will continue to be educated urban dwellers who live fast and active lifestyles and who are seeking to follow healthier diets. More variants, such as fibre, vitamin or mineral enriched varieties are expected to be seen, to differentiate www.cbi.eu/disclaimer 14 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA products in an increasingly crowded marketplace. Promotions and high-profile media campaigns to create awareness of such products will drive overall growth. Unit prices are set to decline over the forecast period, in constant value terms. This is mainly because of the intense competition in fruit drinks where Indian consumers are price sensitive. Private labels are also expanding their presence, which was also the reason for further decline. The market is mainly dominated by a few branded players, but now with more choice, Indian consumers have not only started to become brand conscious, they are also price and quality conscious. Private label offers a combination of good quality and comparatively lower prices, which has increased consumer confidence in these lowerpriced products. With the government’s sanction to FDI in multi-brand retail, private label is likely to receive a further boost when global retailers enter the country. Indian consumers can expect a wider choice of products, better value and lower prices due to the increase in competition. 3.5 International trade Looking at imports from the SAARC region it is particularly evident that very large quantities of fruit drink are arriving from Nepal with a solid rate of expansion. This reflects Dabur –Nepal’s expansion there with the aim to supply North India from Nepal. In juice and nectar and concentrates – Pakistan, Sri Lanka and Bangladesh are the main SAARC origins. Sri Lanka’s share was highest in 2010. Table 3.1: Indian Juice (HS-2009) Imports from SAARC Countries 08-12 (‘000 USD) Exporters World SAARC Aggregation 2008 2009 2010 2011 2012 15,569 1,658 21,726 4,958 27,129 4,919 36,656 4,431 38,439 2,865 783 2,110 1,650 1,722 1,898 3 78 2,252 1,349 346 Nepal 140 1,148 299 748 308 Bangladesh 528 1,504 602 514 249 Bhutan 204 118 116 97 64 0 0 0 1 0 0 0 0 0 0 Pakistan Sri Lanka Afghanistan Maldives Source: ITC Trade Map www.cbi.eu/disclaimer 15 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Table 3.2: Indian Fruit Drink (HS-22029020) Imports from SAARC Countries 08-12 (‘000 USD) Imported Imported Imported Imported Imported Exporters value in value in value in value in value in 2008 2009 2010 2011 2012 World 27,488 23,052 23,911 32,639 44,630 Nepal 26,323 21,442 21,836 29,883 42,470 Bangladesh 0 0 69 816 393 Source: ITC Trade Map Table 3.3: Indian Juice (HS-22029020) Imports from SAARC Countries 08-12 (Litters) Exporters 2008 Imported quantity, Litres World 48,389,730 47,893,110 55,402,950 63,900,661 69,562,404 Nepal 46,624,100 45,545,920 51,942,650 60,537,079 67,096,470 0 131,200 1,193,010 679,300 Bangladesh Source: ITC Trade Map www.cbi.eu/disclaimer 2009 Imported quantity, Litres 0 2010 Imported quantity, Litres 2011 Imported quantity, Litres 2012 Imported quantity, Litres 16 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 3.6 Indian market access requirements 3.6.1 Duties Table 3.4: Customs Import Duty www.cbi.eu/disclaimer 17 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Table 3.5: CVD – Countervailing Duty 6% (countervailing duty to counter subsidies that other countries enjoy) Source: Indian Customs and Excise Database 2012/13 Two additional excise related taxes are added to the import duty and the additional CVD, namely a Special Additional Duty also known as “Special CVD”, 4% of which is related to management of goods valuation. This special tax can be reclaimed by traders. A Customs Cess is also charged to cover administration costs incurred by Customs and is channelled back into customs. In the case of juice products this is typically 3%. A landing charge of 1% is also applied; it is open to interpretation whether this should be considered as a tax. Duties and taxes combined therefore add up to more for orange juice, i.e. 35+6+(4)+3+1 than all the other juices which have 30% base duty. This of course has repercussions considering orange is the most preferred flavour after mango. This import duty of 30% and 35% (for orange) is of course an MFN rate. SAFTA member countries have a 20% rate, and Sri Lanka, Nepal and India have www.cbi.eu/disclaimer 18 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA additional bilateral agreements with India under which the import duty is 0% provided they can produce a valid certificate of origin. 3.6.2 Non-tariff measures Each imported consignment of processed food products is subject to mandatory testing either at the referral laboratories also known as Central Food Laboratory (CFL), located in four places - Ghaziabad, Kolkata, Mysore, and Pune, or at one of 34 other authorised public analyst laboratories that are located in different parts of India. Besides this there are laboratories in neighbouring countries, like BAFRA in Bhutan, that have been accredited by the BNPL in India. Test certification from such laboratories is acceptable provided the procedures specified by the Indian Food Authority are followed properly. Sri Lanka’s Standards Institute has not been accredited by BNPL. Packaging, labelling, certifications, and conformity assessments, or other restrictions falling under Technical Barriers to Trade (TBT) related to UNCTAD Category B have been found for about 228 product categories including prepared foods. Imports of all kinds of foods including fruit juices are subjected to Food Safety and Standards Regulation of 2011 under the respective act. A registered importer with DGFT which has an IECODE must follow the Food Import Clearance System (FICS) under the regulation. First of all an importer or CHA must be registered with and obtain a licence (under licensing and registration of food business) from the central licensing authority of the Food Safety and Standards Authority of India (FSSAI). After obtaining this licence the business, firm or company will be considered a “Food Operator or Importer”. For each consignment a Food Operator, Importer or CHA must take an NOC, i.e. No Objection Certificate from FSSAI and submit it to Customs Authority before import clearance of any food items. FSSAI provides an opportunity to a CHA and importer to apply for an online application for clearance of consignments. The system can be accessed by using the link http://www.ics.fssai.gov.in The importer must follow all the juice standards as specified in the regulations such as chemical contents, packaging, labelling, etc. and should be loaded in the container or vehicle in such a way that facilitates inspection and collection of samples for the necessary laboratory test. The quantity of sample of food to be sent to the Food Analyst /Director for analysis is specified in the regulation. In case of fruit juice, drink or squash 1 ltr of each variety is required. The regulation also makes a provision for the Accredited Food Importer Program. The Food Authority may provide this status based on the criteria determined by the Authority under the Act. The documents which are mandatory are listed below: • • • • • Attach Bill of Entry Attach Examination Order End Usage Declaration FSSAI License/Import License (DGFT) Country of Origin The regulation has also made the provision that food safety storage is assured by the custodian of the freight station until the article is cleared from customs. It is also mentioned that the Authority will follow the risk-based framework in inspection and clearance based on potential hazards of different kinds of foods. www.cbi.eu/disclaimer 19 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Inspection, lab test and clearance procedures 1. The food importer must give pre-arrival notification to the Food Authority with consignment details. 2. The importer or CHA upon arrival of consignment at the point of entry and upon receiving inspection order from the Customs Authority shall: a. Make sure food is available for inspection and collection of samples b. Make application for NOC to authorised officer c. Make payment of application fee and lab fee 3. Upon receipt of application with NOC and all documentary requirements the date and time for inspection are allocated. 4. Two sets of samples are collected and sealed then one set is sent for laboratory testing and another set for custom’s custody. The Laboratory Analyst must prepare a lab analysis test report (Certificate of Analysis) in a given format and deliver it to the authorised officer. A Conformance Lab Analysis Report is issued if the food fulfils the requirements specified in the standards. A Non-conformance Lab Analysis Report is issued for food that does not conform to the food safety standards. It might take a maximum of 5 days, depending on the volume of tests, to complete the test at the laboratory. NOC is issued by the Authorised officer only after the Conformance Lab Analysis Report is received. Then the consignment proceeds to customs formality. The problem lies when the lab test takes more than 5 days and shipment is held up at the border crossing at the cost of the exporter/importer. Very often this guideline of 5 days is not adhered to. 5. www.cbi.eu/disclaimer 20 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 4. Demand trends and opportunities on the European market 4.1 Market characteristics and trends The European market for juices is an attractive market by virtue of its size. Total fruit juice imports in the European market amounted to € 6.94 billion in 2012, with a total volume of 6.89 million tons. The region is a net importer making it an interesting target for exporters from the SAARC region. European exports were € 5.42 billion in the same year and quantity-wise 5.43 million tons. Most exported products remain in the EU (approximately 90%). Outside the EU, the Russian Federation and USA are the main trading countries. (ITC TradeMap) The top 5 importing countries account for nearly 50% of Europe’s demand for Fruit Juices. Germany and Spain are the largest importers with a share of 13% and 11% respectively, followed by Belgium (8%), The Netherlands (7%) and Italy (7%). Among the significant supplying countries, Brazil is ahead of the others such as China, Costa Rica, Thailand, Israel, Turkey and the USA. Contribution of supply from the SAARC region to the EU is small amounting to €58 million in 2012, mainly from India and Pakistan, mostly mango pulp and concentrate. Orange continues to be the most popular juice and nectar flavour, accounting for close to 40% of total consumption in Europe, followed by flavour mixes and apple. Figure 4.1: EU Fruit Juices and Nectars by flavours EU Fruit Juices and Nectars by flavours 21% 38% 4% 4% 13% 20% Orange Flavour mixes Apple Peach Pineapple Others Source: European Fruit Juice Association The economic recession has taken its toll on European juice consumption causing the market to level off. Imports were down 7% in 2012 compared to 2011. There are however still some products for which demand is showing a great deal of dynamism. Driven by a health trend seeking pure and natural and an additional interest in exotic or novelty, we see that there is still hype around energy drinks and coconut-water. Not From Concentrate (pasteurised after extraction as opposed to reconstituted from concentrate) also continues to grow. And whilst the trend for smoothies is starting to wane in some countries, it still offers a viable niche for exotic flavours. Lastly, exotic flavours that have a health claim like aloe vera are in high demand especially if they have been produced sustainably. NF C www.cbi.eu/disclaimer 21 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA The 100% juice (not from concentrate) category is experiencing growth (at a rate of 6.7 % over 2007-11) as a result of the health trend. Not From Concentrate is broadly perceived to be a more natural and therefore healthier proposition. Consumers consider ‘pure juice’ to be the healthiest of all soft drinks available on the market. Not From Concentrate is also a premium proposition and therefore benefits from both the strength of the health trend and also the trend towards ‘premiumisation’. New product introductions of 100% juice (Not From Concentrate) have been a particular trend within the UK market, one of the most dynamic markets for fruit juices. Table 4.1: Growth of NFC vs other juice forms in the 100% fruit segment Volume (Milns ltrs) 2007 2008 2009 2010 % change Total fruit juice 7,294 7,228 7,208 7,170 7,037 -1.90% Chilled 1,248 1,281 1,283 1,321 1,354 2.50% Ambient 6,047 5,947 5,924 5,849 5,683 -2.80% From concentrate 5,911 5,717 5,624 5,525 5,281 -4.40% Not from concentrate 1,384 1,511 1,584 1,645 1,756 6.70% Source: European Fruit Juice Association QUALITY TREND A notable trend in a number of countries in 2011 – with France and the UK being key examples amongst the major EU markets – was a shift in consumer purchasing to more premium products, boosting volume and share of the chilled juice and NFC (not from concentrate) segments. It seems that there is increasing demand for quality over quantity, with consumers prepared to pay out for the benefits of a premium juice. In addition, with from-concentrate raw material prices rising, the price differential between ambient and chilled juice is shrinking. In the more mature high-volume juice markets, many producers have taken advantage of this shift to quality, by investing in innovation and, specifically, value-added chilled and functional juices. COCONUT-WATER Coconut water is still being hyped for its natural sport drink properties with very limited calories etc. Coconut-water has the same electrolyte balance as blood plasma, which makes it an excellent natural isotonic drink. It replaces the fluids and minerals such as potassium that the body loses during exercise; hence, it is considered to be a sports drink. As the sugar content of coconut water is low, it is safe for diabetic patients as well. The product is now starting to get into a more advanced level of adoption into the market. Originally it was brought into the market very slowly by blending it in smaller proportions and carefully introducing the flavour and texture. Now that the European consumer is starting to understand the flavour and texture, the product is increasingly mainstream and reaching a new level with advancements in terms of concentrate production in the Philippines, the world’s main supplier. SMOOTHIES Smoothie drinks are prepared with (frozen) juice, fresh fruit as well as other ingredients including milk, sherbet or yogurt. The smoothie market segment is flourishing in developed as well as emerging markets. In recent years, fruit-based smoothies gained phenomenal popularity across the US and the UK, and are currently one of the major segments of the soft drinks market. Exotic novel flavours are particularly in vogue in the smoothie market. The world market for smoothies is projected by GIA Inc. to touch $9 billion by the year 2015. This is primarily driven by rising health consciousness, on-the-go consumption convenience, and the taste and www.cbi.eu/disclaimer 22 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA naturalness offered by smoothies. Furthermore, aggressive marketing campaigns and new product developments are also driving smoothie market growth. In some markets in Europe, however, demand for smoothies is starting to wane as consumers are coming to realise that smoothies often contain almost as much sugar as carbonated soft drinks. The industry is responding to this concern by blending more vegetable fibre in the smoothie mixes. HOW TO GET A FOOT IN THE DOOR The major brands are consolidating supply and strengthening their own supply channels, so these are very hard for small players from SAARC to penetrate. Smaller players in Europe are more flexible however and still willing to invest in new flavours. That said, “small” in the juice business remains quite large, e.g. order sizes from even the largest smoothie brands such as Innocent and Shakies are not large enough to justify sourcing directly from origin suppliers – they still buy from suppliers within Europe. Buyers that have order sizes that justify direct procurement, cannot manage more than around 10-12 suppliers otherwise things becomes too complex. Wherever demand exceeds the standard supply by these fixed suppliers, buyers revert to brokers to fill the gap. Brokers unite supplies from small suppliers and can selectively bring together a unified product. A broker is stronger if he can supply superior products such as superior flavour pineapple juice from Sri Lanka. 4.2 EU market access requirements The EU market is famously strict for its regulations and particularly when it comes to food safety measures. SAARC exporters will face a challenge, not only meeting the legal requirements but also fulfilling preferred buyer requirements which are more stringent in order to reassure their customers beyond what the law requires. The table below lists the key legislative and non-legislative requirements applicable to importing juice products into the EU. An important consideration is that where the product is not a final ‘for consumption’ product, not all legislation will apply – e.g. labelling requirements would not be necessary in this case. Legislation Additives, enzymes, flavourings and colourants Contaminants in food Food contact materials Food Control Food Labelling Fruit Juices General Food Law Good Manufacturing Practice (GMP) for food www.cbi.eu/disclaimer Brief description The EU has set controls on permitted use of additives, enzymes, flavourings and colorants intended for human consumption. Colourants and flavourings are commonly used in the juice industry Specific maximum levels are set for specified products of food groups Rules are laid down for materials and articles coming in contact with food in order to prevent any unacceptable change in the composition of the food item and to protect human health All food products entering the EU are subject to official controls to check that the products are in compliance with food laws. Very specific regulations covering information about the contents of a food product are laid down, including requirements about nutritional information, allergens and health claims. Specific regulations on definition of a fruit juice and related labelling are laid down in the legislation The General Food Law is the framework regulation in EU food safety legislation. Food safety is the key issue. Traceability is also a key component related to food safety crisis control. Specific rules are laid down for the manufacture of food contact materials. These are not directly applicable to producers outside 23 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA contact materials Hygiene of foodstuffs (HACCP) Maximum Residue Levels (MRLs) of Pesticides in foods Microbiological contamination of food Organic Production and Labelling Packaging and packaging waste Non- Legislation (Voluntary) the EU but may be indirectly relevant. Hygiene control is legally binding for food processors. EU Legislation has been laid down to regulate the presence or permitted level of presence of pesticide residues in food products. With a direct link to fruit, these laws are very relevant in the juice industry The EU has set microbiological limits for food borne microorganisms, their toxins and metabolites. Regulations are to be followed in production and labelling before a product can be sold as “organic” in the EU EU packaging legislation restricts the use of certain heavy metals, and treatment of packaging waste. Food Safety and Quality Management Systems e.g. BRC, IFS Many European buyers, particularly supermarket chains will seek certification from food safety and quality management systems like British Retail Consortium certification Food Quality Management e.g. ISO22000 The most common process quality control management system in the food sector is ISO 22000 Social Responsibility e.g. SA 8000, ISO 26000 Many European buyers are now also seeking certification from suppliers to ensure social responsibility in terms of human rights and safety and health of workers in the processing unit where the juice is produced as well as further up the chain at the orchard level Environmental Management e.g. SA 14000, ISO 26000 Particularly related to water treatment in the juice industry www.cbi.eu/disclaimer 24 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 5. Structure of the chain 5.1 The value chain map Diagram 5.1: Sri Lankan juice value chain map Consumption RETAILERS Domestic Juice Consumption Coconut Water Export WHOLSLR HOTELS/RESTAURANTS RETAILTERS IMPORTER TRADING Export Domestic Fruit pulp export DEALERS, WHOLESELLERS, AGENTS Packed juice imports Packed Juice Export India/M ldvs EXPORTER PROCESSING Juice Pulp Coco Water JUICE PROCESSOR Juice concentrate / pulp Imports PULP PROCESSOR INPUT SUPPLY Fruit Other IMPORTER WHOLESELLER INTEGRATOR FARMER VC Functions Local supplier Other inputs – e.g. sugar, pack materials Other inputs – e.g. PET, glass, carton, flavours VC Operators The Sri Lankan juice chain can be followed from a series of processes starting as shown on the left hand side of the above value chain map. The chain starts from inputs, on to processing, thereafter trading and finally consumption. As has been mentioned previously, Sri Lanka has only skimmed the surface of exploiting its natural fruit base and currently a big portion of the juice is produced from imported concentrates. Having said that, Sri Lanka is different to Nepal and Bhutan (also covered by this overall study) in that Sri Lanka does export pulps and frozen pulps. Hence in the value chain map pulp processing www.cbi.eu/disclaimer 25 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA has been shown as a stand-alone component of processing. Coconut-water production is a slightly different process as it involves simple extraction of water from the nut. For this reason, coconut-water is grouped with pulp processing and a separate channel is shown for coconut-water exports. The packed juice exports are pre-dominantly from the two Indian plants, and are fully based on imported concentrates. Most of the local firm packed juices (final product) are destined for the local market, for which growth figures are not available but estimates show around 10-15%. Some exports of final juice products (local firm produced) also go to the Maldives and Sri Lankan diaspora markets in Europe and USA. Within the domestic market, supermarkets (labelled in the diagram as “retailers”) are an important channel through which the juice is supplied to consumers. Distributors and wholesalers take care of distribution to these retailers. Some of the brands also supply directly to consumers through their own fruit parlour outlets. On the input side, local content is quite high for products like glass, PET, carton and flavours. This is supplied by a pool of suppliers, except in the case of glass bottles which are supplied by one company - Priamal Glass Plc. Other inputs such as sugar, tetra-pack sheets and other secondary packaging materials are imported by separate importers, who also become actors or operators in the chain. On the fruit side of inputs, fruit farmers produce individually; cooperative approaches are not yet properly organised. Middlemen bring together or “integrate” these supplies and then supply onto wholesalers from whom the fruit is a procured by the processors. Communication along this line of fruit supply is limited; the fruit famer rarely has any direct communication with the processor. The farmer only deals with the middleman collector who collects on behalf of the wholesaler. In India the product reaches the consumer after passing through the hands of an Importer, a wholesaler and a retailer. In the case of Dabur and Tunip, they probably have their own established distribution networks. www.cbi.eu/disclaimer 26 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 5.2 Actors and influencers in the chain – roles & functions Main Actors and features Fruit Farmers • Back yard, small farmers scattered in 20 Districts Roles and Functions • Collect inputs like planting, materials, fertilisers, and insecticides from nurseries • Manage fruit orchards for raising plants. • Harvest fruits, manual grading, packing and transporting to selling points Raw material suppliers • Fruit Collectors/Middlemen • Importers • Glass manufacturer • • • • Fruit Pulp Processors and Exporters • Pulp producer/exporters Fruit Juice (final product) Processors and Exporters • Organised factories • High investment • Have distribution network. Dealers/ Wholesalers / Retailers • Minimum capital needs. • Fixed margin. www.cbi.eu/disclaimer • • • • • • • • • Collection, grading, packing and transporting fruits to markets. Importing and distributing basic raw materials like plastic or paper packaging materials, sugar, chemicals, fertilisers, tools and equipment. Importing fruit concentrate Manufacture and distribution of glass, PET and carton materials Cleaning and peeling fruits Crushing of fruits Packing of pulp into aseptic drums Freezing of selected pulps Exporting of pulps Procurement of raw materials, packaging materials, equipment and auxiliary materials. Fruit crushing or blending of pulps, boiling, sterilising, packaging and distribution of juice. Quality control at each step of processing. Distribution local and for export • • • • Linkages with the juice importers, domestic juice factories, and customers. Procurement transportation of juice from the suppliers. Storing and distribution. Selling and delivering 27 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Main Influencers Ministry of Agriculture (MoA) Department of Agriculture (DoA) National Agribusiness Council Ministry of Commerce and Industry (MoCI) Department of Commerce (DoC) Department of Industry • • • • Lobbying for promotion of Agribusiness Capacity building for farmers and agro-producers Exhibitions Apex body responsible for trade, industry, strategies, plan and regulation formulation, and implementation • Promoting and facilitating trade by creating and enabling environment and services to the private sector. Negotiating trade terms internationally Trade Promotion and Development Fostering sustainable industrial development. Creating sustainable and business enabling environment for private sector development. Export Development and Promotion Export Advisory Services Market Information Dissemination • • • • • • • Sri Lanka Standards Institute (SLSI) • Sri Lanka Food Processors Association (SLFPA) • • • • www.cbi.eu/disclaimer Technical advice and extension services in crop production and protection Marketing support services Strengthening farmers groups and cooperatives • • • • Sri Lanka Export Development Board The Lanka Fruit & Vegetable Producers, Processors and Exporters Association (LFVPPEA) Roles and Functions Apex body responsible for agriculture development, policy, strategies, plan and regulation formulation, and their implementation. • Quality and standards testing and certification of processed food products Coordinating and liaising with national, regional and international agencies on regulation of quality and consumer safety. Advocacy for member food processing companies Capacity building Standards development Market research and export promotion • Capacity building for improved productivity, post- harvest handling, quality and safety of fruits • Export promotion 28 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Diagram 5.2: Overview of the Roles of Influencer/Stakeholder Institution Roles across the Chain IMPORTER DISTRIBUTOR/ SUPPLIER FRUIT FARMER INTEGRATOR JUICE PROCESSOR WHOLESALER EXPORTER PULP PROCESSOR LMPA – Lanka Microfinance Practitioner’s Association Product Safety SLSI Trade Negotiation Chambers NEDA – National Enterprise Development Authority NABC EDB SLFPA SLFPA NCCIS DoT Investment Policy BOI Trade Promotion Product Standards SLSI EDB Industrial Policy DoI EDB SME Support Services NED Export Market information Processing Inputs Import Control Marketing Support LFVPPEA Imported Customs Micro-finance Micro-finance LMPA LMPA Extension Services Inputs - Collection NABC DoA Inputs - Farming NCCISL – National Chamber of Comm. & Indus of Sri Lanka www.cbi.eu/disclaimer 29 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Diagram 5.3: Matrix showing relative involvement of the “influencer” institutions in the Sri Lankan Juice Value Chain IMPACT H L M SLFPA LFVPPEA H Dept. of Agriculture EDB Dept. of Trade NABC M INTEREST Chambers Dept. of Industry SLSI BOI NEDA L Customs The above diagram shows the roles of each of the main influencers across the processes of the chain from farm inputs all the way to export. As we see, there are many functions being provided that can support the juice industry. Influence appears to be more concentrated around export than in farming and collection. Stakeholders that influence the chain will have varied levels of impact in the value chain and naturally also varied level of interest. Some have set certain standards and will now wish simply to be kept informed. Others may be very engaged with the chain showing a high level of interest in the chain and also be in a position to have a very influential impact. The matrix provided above categorises the various influencer/stakeholder organisations in the juice chain in 4 quadrants of high and low interest vs. influence combinations. The top right quadrant of the matrix below shows those organisations that have a high interest in the juice chain and can also have a high impact. Trade terms negotiated by the Department of Trade can open opportunities for the whole chain. The Department of Customs is an example of a body that can have a high impact on trade for the sector in terms of controlling imported inputs, in particular. The body, however, does not have much specific interest in the juice sector as it is neutral towards all sectors. The SLSI and BOI can also have a high impact on the juice value chain, but the sector is not their primary focus. The inverse of this is the case of the LFVPPEA which has a very high interest in the sector but does little more lobby and provide information and thus does not have much impact. The middle quadrant is where we find the influencers which can have quite an impact but do not have fruit and juice at the centre of their agenda. Such is also the case with the various Chambers. www.cbi.eu/disclaimer 30 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 5.3 Economic analysis of the chain Figure 5.1: Cost Proportions across the Sri Lankan Juice Chain Cost Proportions across the Sri Lankan Juice Chain 180.00 160.00 140.00 LKR 120.00 100.00 80.00 60.00 40.00 20.00 0.00 1 2 3 4 5 Fruit Pulp Other inputs e.g. sugar, acid Packaging (glass) Processing Opertaional Costs (ex-factory) Logistics and profit Assumptions: 50% fruit pulp, based on orange concentrate + duties Indian Nectar Retail Price: LKR 185 Acquiring data on cost build-ups for the juice industry is not an easy task because it depends very much on the type of fruit and on the concentration. It is also very challenging to obtain information in Sri Lanka where profits are very much part of a game of adjusting juice concentrations. Even more challenging, is the task of obtaining this from the industry when they are all in the same room at a stakeholder’s conference. Nevertheless certain prices are a given and the above chart was pieced together with some general proportions shared by authorities on what is frequently declared in the cost statements required for applying for GSP. Taking the known landed price of orange juice concentrate with import and excise taxes (48%) added, and converting concentrate to a nectar at 50% fruit and adding costs further upward, we arrive at the ex-factory price plus profit margin of 169LKR for export (FOB) which is very close to the Indian retail price of LKR185. In the domestic market, the same product would reach a retail price of around LKR220. What is particularly evident is that the costs of the fruit pulp (26%) and of packaging (27.5%) are significantly high. Fruit prices for local fruit pulp manufacture were also gathered from processors (this is an amount paid by processors to wholesalers in the chain) and these are proportionally similar to imported fruit concentrate equivalents during the season, but are significantly higher out of season. This is so much so that peak off-season fruit prices render juice production unprofitable for export. Costs are clearly a challenge in the chain. It is known that Sri Lankan costs of labour and energy are proportionately high. If prices of fruit pulp and packaging are also high, costs become a concern. If Sri Lanka is to increase its www.cbi.eu/disclaimer 31 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA local fruit content contribution to the industry, it will need to do so in combination with a reduction in the cost of fruit. An important contributory factor to the fruit cost is the collection mechanism: (1) there are multiple actors in the chain between the farmer and the processor (2) there is virtually no communication between these two participants (farmer and processor), making better matching of needs impossible (3) there is no pulping at source so the extension of in-season capture is limited, keeping off-season prices on the high side. 5.4 Bottlenecks in the chain Diagram 5.4: Bottlenecks in the Sri Lankan juice chain Inputs - Farming Small landholdings Fruit farming knowhow lacking Not organized for marketing Inputs - Collection Ltd. collection, grading, mktg No logistical support to farmers Processing 40 small processors lack finance & technology Insufficient pulping capacity at fruit source Export Laboratory infrastructure inadequate High cost of intnl . quality certification Cold chain/ freight limitations The above illustration highlights the key impediments faced at different levels of the Sri Lankan juice chain. The variation in size of the bottleneck shapes in the diagram does not imply any difference in severity of the bottleneck. The section below provides a more detailed look at each of them. 5.4.1 Farm Inputs Level Bottlenecks (1) Small landholdings Small land holdings combined with contract farming not having come very far in Sri Lanka, at least not in terms of fruit growing for the juice industry, translates to a lack of organised or commercial farming. Extension services are also poorly funded. Thus, productivity is low and farmers do not have the capital required to invest in high yielding seeds or use any form of farming technology. (2) Lack of fruit farming know-how Know-how is lacking in input management, in farm management as well as in postharvest handling. Knowledge about market requirements and quality is also lacking at the farmer level. (3) Lack of organisation for production and marketing Other countries with small land-holdings have found solutions in grouping together into cooperatives that share costs, improve production and organise marketing of their products collaboratively. In Sri Lanka fruit farming there are no organised cooperatives. www.cbi.eu/disclaimer 32 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 5.4.2 Input Collection Level Bottlenecks (4) Lack of collection, grading, packing, marketing centres Without organised collection, grading, packing and marketing centres, the collection of lower grade fruits for the juice industry is difficult to achieve. The current collection mechanism is not conducive to effective channelling of fruits into the juice industry. In fact the farmer gets very little logistical support and this seriously hinders fruit reaching the industry. (5) Negligible pulping at source An important means to acquire fruit inputs for the juice industry is pulping at source as this helps to counter (1) losses due to perishable nature of product (2) seasonal time span limitations (3) non-collection of low-grade fruits at farm level due to assumption that market price will not be achieved. Currently, there is no such advantage. 5.4.3 Processing Level Bottlenecks (6) Lack of finance and technology (smaller players) The pool of about 40 small players in the Sri Lankan juice industry lack up-to-date processing technologies and are prevented from accessing the required technologies because of the high cost. Lack of adequate financial instruments makes this access to technology a prolonged issue inhibiting growth. (7) Insufficient knowledge about markets and trends The small players also lack foreign exposure to new knowledge and there is an absence of expert advice and training which does not help this situation. Knowledge about foreign markets and their requirements, including the SAARC region, is also lacking. 5.4.4 Export Level Bottlenecks (8) Lack of laboratory infrastructure There are no laboratories that fulfil international standards to test quality standards and issue consignment test certificates which are acceptable to the authorities in importing markets. The Sri Lankan Standards Institute (SLSI) is responsible for providing quality certification for food manufactures for local sale and consumption but it is not accredited by an internationally recognised institution to issue acceptable microbiological test certificates for food safety. (9) High cost of international quality certification The cost of quality certification is seen as a key impediment for entrance into the export arena. This refers not only to global food safety and hygiene management process certifications like HACCP, ISO 22000 and BRC, but also to regional certifications like EFSA, ANQFSA, FSMA. The main problem being of course, the fact that the Sri Lankan national standard is not recognised abroad. (10) Cold Chain / Freight limitations Cold storage capacity at the airport and limitations in the amount of the freight that can be airlifted limit export capacity for pulp export. This bottleneck is of course not relevant for the Indian plant exports which would be shipped by sea. www.cbi.eu/disclaimer 33 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 6. Competitive assessment of the Sri Lankan juice industry 6.1 Comparison parameters In order to gain a sense of the competitive strength of the Sri Lankan juice companies, below you can find a spider chart and corresponding table based on the report authors’ comparison of various aspects of competitiveness against the competing Indian and Nepali juice industries for the Indian market. While it may seem a little odd to be assessing competitive strengths against India for the Indian market, the real competition in India is the Indian industry itself. Besides aspects such as threat of other competitors or replacement products, five aspects of competition can examined: • • • • • • Product quality Price Response time Flexibility to respond to small orders Flexibility to large orders Product adaptation Whilst a bigger proportion of Sri Lanka’s current exports consists of fruit pulp, concentrate and coconut-water exports, compared to final packed juice exports, there is a need for consistency in comparing to the other countries falling under this study. The assessment has therefore been made with final packed juices in mind. Another complication, as was the case in the Nepal value chain study, is the presence of very large scale players from India. The issue is, in fact, whether to include them in the competitive comparison or not. Keeping consistent with the approach taken in the Nepal value chain study, the assessment considers the Sri Lankan juice sector without Dabur and Tunip. 6.2 Analysis Figure 6.1: Competitive Comparison Bhutan/India/Nepal Competitive Comparison Bhutan/India/Nepal Nepal India Sri Lanka Product Quality 5 4 Product adaptation 3 2 Price 1 0 Flexibility - large orders Response Time Flexibility - small orders www.cbi.eu/disclaimer 34 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Sri Lanka India Nepal Product Quality 4 4 3.5 Price 3 5 3 Response Time 4 4.5 3 Flexibility - small orders 4 3.5 4 Flexibility - large orders 3.5 5 3.5 Product adaptation 3 4 3 Scores: Excellent 5, Very good 4, Good 3, Satisfactory 2 and Poor 1. All things considered, from a competitive perspective, Sri Lanka has several things in its favour: • • • • • • Quite significant volumes (by the larger players and cumulatively) Several experienced companies that have internationally recognised quality and food safety certifications with export experience An abundance of skill – also higher level skills for the food sector Logistical advantages with direct access to the sea and a geographical location that is well placed to access the South of India. Globally sought-after products such as pineapple with a superior taste and colour and coconut-water. Production problems are, however, an issue. Locally produced packaging materials (although not tetra pack which is the main export form) Disadvantages: • • • Costs of labour and energy are high (and as we have seen also in fruit and packaging) Challenges with cold chain capacity will apply less for the packed juices segment, nevertheless it can have an impact on supplies of concentrates No internationally recognised national laboratory, leading to delays to shipments and high costs when consignments need laboratory testing certificates Compared to India, Sri Lanka will not manage to meet the Indian juice industry’s strength in terms of price and the ability to cope with very large orders. Compared to Nepal, Sri Lanka has logistical advantages with its sea access compared to Nepal’s transportation challenges. Sri Lanka also has higher quality because of the presence of more certified international companies, more natural content and more export experience. In terms of size, Nepal and Sri Lanka (excluding Dabur and Tunip) are of a similar size, so the ability to handle large orders is about the same and there is also a certain flexibility for small orders. 6.3 Conclusions on Sri Lankan competitiveness Sri Lanka has the opportunity to further exploit its quality in the future if it can strengthen its supply of sought-after superior fruits. Response time can also be an area in which to compete as a result of its geographical advantages. Price, on the other hand is the area in which it is most challenged, especially compared to India. www.cbi.eu/disclaimer 35 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 7. Recommended strategy for upgrading the juice value chain 7.1 Vision statement Increasing exports to SAARC countries, in terms of volume and value, via better market insights and an improved offer, thus creating increased inclusion: Expand exports of superior quality pulp and juice products to India and Europe in both mainstream and niche markets (Europe mainstream: pineapple, guava, mixed. Europe niche: wood apple, aloe vera) (India mainstream: pineapple, guava out of season). 7.2 Strategy Achieve this through: Boosting the Sri Lankan Juice Value Chain at three different levels: 1. At the input level: the process of conversion of Sri Lanka’s fruit base needs to be transformed in terms of improved farming, increased pulping at source and improved collection mechanisms. 2. At processor level: the multiple small producers need to be developed from small to medium size. This is primarily related to a need to strengthen their managerial capacity, insufficient access to finance and technology and inadequate knowledge of market requirements and trends. A clustering approach may serve them well to achieve the desired expansion 3. At the medium/large processor and exporter level: a boost is required in the form of enabling volume increases. There are not necessarily challenges in terms of their capacity but they face volume limitations due to bottlenecks with cargo space and cold storage capacity. They will also greatly benefit from an improved supply of local fruits and pulp when improvements are achieved at the input level. Input level Small processor level Improving farm practices, M/L proc. & exporter establish pulping capacity at sourcing and improving Strengthening managerial level collection mecahnisms and technical know-how and access to finance Unleashing actors at this level by clearing volume expansion bottlenecks in freight/cold storage capacity and local pulp supply BOOST www.cbi.eu/disclaimer BOOST BOOST 36 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 7.3 Rationale Sri Lanka has a rich fruit base with globally sought-after fruits by the juice industry such as pineapple and coconut-water. It therefore makes very good sense to seek expansion of this rich backward linkage for the Sri Lankan juice industry. This has to be achieved not only through strengthening the farmer’s yield and quality of production, but also through reinforcing the link between processor and farmer as well as through improved collection mechanisms. These three areas are currently weak points – the farmer is isolated, disorganised and constrained by limited land and the means to improve his crop. At the processing level there is a rift between large, well established players that use advanced technology and have internationally advanced quality certifications and a relatively large pool of entrepreneurial small players that lag behind in terms of technology, international exposure and managerial capacity. Through, for example a cluster approach, this group could be more involved in the industry and contribute to an expansion of the industry for export. This group and other medium sized companies will benefit from improved market access abroad by means of reduced obstacles on the food testing front that Sri Lanka still lacks and in terms of better access to international quality certifications (e.g. through group certifications). The larger companies face more challenges in terms of blockages to trade such as limitations in cold storage and air freight. Efforts can be made to reduce this constraint. The proposed product/market combinations are based on areas where Sri Lanka has seasonal or superior fruit advantages and where opportunities exist on the market side. www.cbi.eu/disclaimer 37 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 8. Proposed programme interventions for upgrading the value chain With this overall value-chain upgrade strategy framework in mind, the following interventions can be recommended at the various levels with the support of specific proposed support agencies, be they donors, ministries or institutions such as universities. Programme intervention area 1: Key bottleneck to address: Expected structural change in the value chain (outcome): Increased supply of fruit to the juice industry and creating closer ties between processor and farmer Programme activities: Upgrade fruit productivity & quality (1) Small land holdings. (2) Lack of fruit farming know-how. (3) Farmers not organised for production or marketing. Programme intervention area 2: Upgrade collection mechanisms Expected structural change in the value chain (outcome): Increased collection/grading/marketing/source pulping of fruits to increase supply of fruit to the juice industry Key bottleneck to address: (4) Lack of centres for collection, grading, packing, pulping at source Programme activities: www.cbi.eu/disclaimer Form or strengthen fruit farmer cooperatives Explore the possibility of various models of contract farming between exporter and farmers/cooperatives Strengthen supply of farm inputs and improve credit facilities for the farmers to access required inputs to upscale plantation Strengthen extension services and training in GAP and farm management Strengthen information dissemination on farm management and GAP Provide training in good orchard management Provide training to improve harvesting practices Share best practices on orchard management and harvesting Provide training to farmers on post-harvest handling practices Setup more collection/grading/packing marketing centres at production pockets based on feasibility assessment Increase awareness of marketability of low-grades amongst farmers Set up pulping plants close to grading centres Conduct research to identify best 38 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA practices of off-season income for pulping units Programme intervention area 3: Upgrade small processors Expected structural change in the value chain (outcome): Small processors fit for export Key bottleneck to address: (6) Small processors lack technology and access to finance Programme activities: Programme intervention area 4: Upgrading throughput Expected structural change in the value chain (outcome): Increase in export by Medium and Large Players due to increased supply and fewer constraints caused by cold chain and air freight limitations Key bottleneck to address: (10) Cold chain and air freight limitations Programme activities: Programme intervention area 5: Improved Market Access Expected structural change in the value chain (outcome): • Improved access to markets thanks to improved laboratory infrastructure and technicians • Improved access to internationally recognised quality certification systems Conduct feasibility assessments on means of expanding cold chain at airport capacity (e.g. through PPP) Study possibilities for a dialogue platform with airlines and the ministries for the handling increases in air freight capacity Key bottleneck to address: (8) Laboratory infrastructure lacking (9) High cost of international quality certification Programme activities: Strengthening of SLSI’s laboratory and testing capacity Support the process of getting accredited Training of lab technicians and food technicians www.cbi.eu/disclaimer Explore benefits of clustering Improve financial instruments – tie in donor agencies offering special grants to small businesses Support technology upgrading Provide training and advice on management and marketing Provide training on process technology Provide information on export markets and market requirements Provide trade fair participation support Share best practices Food Safety/GMP/GAP certification support for juice processor/exporters 39 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA 9. Final recommendations These are interesting times for the Sri Lankan juice industry. The domestic demand is strong, large Indian players are showing an interest and products in Sri Lanka’s portfolio, such as its superior pineapple juice and king coconut-water, are globally sought after. Passion fruit and aloe vera are also well worth focussing on in addition to several pulps that have a seasonal advantage to feed into the double digit growth market in India. All these developments are taking place at the same time but, in order for Sri Lanka to take proper advantage of these positive developments, particularly with a view to a more inclusive gains, several structural changes will have to be implemented. Firstly, backward integration into the fruit production sector needs to be initiated. This is not a straightforward task as there are several bottlenecks at the farmer level and particularly also when it comes to the collection mechanism. The farmer has very little support in terms of getting the fruit to market. There is not only a need for fruit collection centres but also a significant need for structural change in the juice chain as there are several actors in the chain between processor and the farmer and very little communication between them. As a result fruit costs are high and fruit supply is prevented from reaching the fruit industry. Communication and collaboration between actors is a key component to the success of the proposed vision. Fruit farmers need to confront their challenges of limited landsize, limited know-how for production, and limited marketing support by collaborating with each other much more and by organising themselves into cooperatives that collectively strengthen production and marketing. Communication and collaboration between actors is also key – processors need to communicate much more with farmers (or better still famer cooperatives), and seek collaboration through exploring the possibilities of contract farming as well as setting up pulping units at source. For an entire (and inclusive) expansion of the juice chain the vision also recommends strengthening small players to lift them to an export-ready level by developing their technical and managerial capacity. Once again, collaboration has been proposed in the form of exploring the possibilities of clustering. For the larger, better established players to address cold chain and freight limitations, once again communication and collaboration are required. The Sri Lankan juice chain has much potential but, at the same time, much still needs to be done to reap the benefits thereof. Many of the structural issues and bottlenecks can be realistically addressed with external support; others, such as getting laboratory capacity internationally certified or addressing air freight limitations, are not so easy to overcome. Encouraging collaboration between actors and setting mechanisms to disseminate information and encourage communication will definitely help the Sri Lankan juice chain to move towards the proposed vision of upgrading the chain. www.cbi.eu/disclaimer 40 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Annex I: Overview of key players Tunip Lanka Onjus, one of India’s leading fruit- based juice brands, is marketed and distributed by Tunip Agro Limited. Currently, Onjus has a total of 14 flavours in its product portfolio. Onjus offers fruit-based beverages in three different product ranges namely Onjus, Onjus Gold and Onjus Chill. The Onjus range includes: oranges, Pineapple, Punch (mixed fruit), Guava, Mango, Pomegranate, Cranberry, Red Grape, Cherry Berry and Litchi. The premium juice, Onjus Gold range offers 100% pure juices and includes: Orange, Apple, and Mixed Fruit. Onjus also introduced Onjus chill in Mango in 2012. Onjus has national tie-ups with all major retail chains such as Wal-Mart, Reliance, Big Bazaar, Aditya Birla and more. Onjus is available in over 200,000 retail outlets through a more than 250 distributors owing to its extensive network across the length and breadth of India. Tunip Agro Limited has invested close to $20 million to setup its own facility in Sri Lanka. A 100% owned subsidiary of Tunip Agro Limited, Tunip Lanka Pvt. Ltd, has setup a manufacturing plant using the latest and most advanced packaging technology that Tetra Pak has to offer. This facility also includes an advanced product development and innovation centre to help leverage the company with regard to quality and taste against its competitors. Lanka Canneries Ltd Lanka Canneries Limited are the successors to the Marketing Department which was established by a British Civil Servant Mr.R.H.Basset in the 1930’s. With the advent of the 2nd World War many troops were stationed in Sri Lanka. With the shortages due to the war it was necessary for the Marketing Department to supply food to the troops stationed in Sri Lanka. Mr.Basset took immediate steps to produce jam from local fruits and the fruit processing factory was built in Narahenpita, Colombo. After the 2 nd World War the Marketing Department progressively improved the fruit processing facilities at Narahenpita, Colombo by importing machinery from the UK, USA & Europe. The range of products grew from a variety of Jams to Sauces, Canned Fruits and Vegetables to Cordials, Pickles and Chutneys etc. Due to the growing demand of MD brand products a second factory was built in 1976 in Attanagalla with the latest fruit processing machinery imported from Europe. With these two factories Lanka Canneries Limited was able to meet the growing demand in the country and began exporting these products in the 1980’s. A combination of over three quarter century of expertise and the natural bounty of sun ripened fruit makes Lanka Canneries Limited, Sri Lanka’s leading manufacturer, distributor and exporter of Natural Fruit Juices, Jams, Sauces, Cordials, Canned Fruits & Vegetables, Pastes, Purees, Creams, Chutneys & Pickles etc. Lanka Canneries Limited export their products to over 30 countries including the USA, Canada, Japan, Australia and the Middle East and have recently expanded into the export of coconuts fresh fruits and vegetables. Expolanka (Pvt) Ltd Incorporated in 1978, the company was the pioneer exporter of Sri Lanka’s Fresh Fruits and Vegetables to the countries in the Middle East. Within a few years the company commenced exports of Fresh Coconuts and Desiccated Coconut from Sri Lanka, and since then Expolanka (Pvt) Limited sustained its presence in the Middle East, the Mediterranean, Africa, Australia, Europe, and the United Kingdom. In 2008, www.cbi.eu/disclaimer 41 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA the company recognized the need to add value to its products and ventured into the manufacture of Dehydrated Fruits, Fruit Juices and Ready to Eat Food Products which are distributed under the Mo Fruit and Taprobana brands. The company has internationally recognized HACCP, HALAL & Organic Certifications. Expolanka (Pvt) Limited is a subsidiary of the Expolanka Group of Companies. Edinborough Products [Pvt] Ltd Established in 1973, Edinborough Products started off by producing cordials and gradually expanded into exporting and retailing other food products such as jams, Sauces, Cordials, Chutneys, fruit juices etc. we have established a portfolio of products targeted at different market segments. They are also a leading manufacturer of soya sauce. Their entire ranges of local products are manufactured in our fully fledged state of the art factory situated in Padukka, Sri Lanka. The factory is an ISO 22000 certified company and has also obtained SLS and HACCP standards. Coca-Cola Beverages Sri Lanka Ltd Coca-Cola Beverages Sri Lanka Ltd (CCBSL) is a subsidiary of Coca-Cola Sabco Pty Ltd, South Africa. CCBSL produces both sparkling and still beverages under the brand names; Coca-Cola, Sprite, Fanta (Orange, Portello & Cream Soda), Coca-Cola Light, Minute Maid (Orange, Mango, Apple & Mixed Fruit), Lion Club Soda, Tonic and Ginger Beer under the license from Coca-Cola Corporate. The products are delivered to the end-users through island-wide distributor network and general trade partners and also through the modern trade channels. CCBSL employs 522 permanent employees. Their manufacturing facility in Biyagama is governed by Coca-Cola international standards known as Coca-Cola Operating Requirements (KORE) and they are certified to international standards such as FSSC 22000:2010 (Food Safety System Certification), ISO 9001:2008 (Quality Management System Certification), ISO 14001:2004 (Environment Management System Certification), BS OHSAS 18001:2007 (Occupational Health & Safety System Certification), and Evolution3, which is the highest internal certification by the Coca-Cola Corporate. Country Style Foods (Pvt) Ltd SMAK, the popular household brand of food products has completed 32 years in business. The owners of SMAK brand, Country Style Foods (Pvt) Ltd., which was formed with just 10 employees in 1981 has steadily grown over the past three decades and today has become one of the market leaders in the beverage industry. The Company says it owes its success to the high standards it maintains in quality, processing, manufacturing, marketing, sales, human resource management while maintaining a close relationship with the consumers and retail vendors. Country Style foods (Pvt) Ltd. is a SLS, GMP, HACCP & ISO 22000 – 5000 certified company. www.cbi.eu/disclaimer 42 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Annex II: Overview of key Influencers/Stakeholder Institutions Department of Agriculture • Research and product development in fruits by Food Research Unit of the Horticultural Crops Research and Development Institute, Gannoruwa • Different fresh juices, blends, cordials, RTS, Puree, Concentrates, smoothies etc. • Development of processing techniques • Selection of machines and models • Designing juice factories, products, labels and presentations • Conducting training programmes and courses • Conduct awareness programmes • Educating the customers on values and products • Sales promotion of the clients of the DOA • Project proposals and budgeting of fruit juice manufacturing projects • Visiting and advising (consultancy) on request • Coordination of state projects on fruit processing National Agribusiness Council The National Agribusiness Council is the apex body for several agribusinesses related Trade Associations & Companies. The collective expertise on local agribusiness is immense. The Food Processors Association and the Fruit & Vegetable Exporters Association are very active members within our organization and also some leading Food Processing companies are our Corporate Members with positions in the Executive Committee. The NAC involves itself in policy dialogue with State Sector Institutions on issues related to the membership and acts as a link between the Public Sector & the Private Sector. The NAC can play a major part in introducing new technology to the fruit juice sector by playing a pivotal role in a group consisting of local fruit juice producers, The Ministries of Agriculture & Industries, technology providers & a funding agency. Sri Lanka Standards Institution SLSI plays a vital role in connection with the development of the fruit juice industry in Sri Lanka in numerous ways. As the national standards body in the country, SLSI has formulated a number of national standards related to the fruit juice industry, with the participation of various stake holders related to this industry. Some of the standards are, Ready-to-Serve Fruit Drinks (SLS – 729) , Fruit Juice and Nectars (SLS-1328 ), Fruit Squashes, Fruit Syrups and Fruit Cordials (SLS - 214 ), Code of Hygienic Practice for the manufacture of Fruit and Vegetable Products (Processed) – (SLS- 209). Through the Consumer Affairs Authority Act, obtaining “SLS” mark for Ready to Serve Fruit Drinks, Fruit Squashes, Fruit Syrups and Fruit Cordials has been made mandatory for local manufacturers and this act has been implemented through the Product Certification Division of SLSI. So far SLSI has issued SLS permits for about twenty manufactures in this industry. The processors can obtain testing (microbiology, food, and chemical) and calibration www.cbi.eu/disclaimer 43 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA services from SLSI. In house training on laboratory testing is provided on the request of the processors. Systems Certification Division has issued GMP, HACCP and ISO 22000 certifications for a number of fruit juice manufactures which helps them immensely to compete in the national and international markets. SLSI’s training division conducts various training programs related to Food Quality Management where the fruit juice manufacturers can increase the awareness and thereby improve the quality and safety of products. Department of Commerce The DOC is the national central point responsible for the evaluation and negotiation of bilateral and regional trade agreements, and the implementation of existing agreements. At present, the DOC is responsible for the implementation if Indo- Sri Lank free trade Agreement (ISFTA), Pakistan- Sri Lanka Free Trade Agreement (PSFTA), SAFTA/SAPTA/, APTA, GSTP, and GSP. With respect to the fruit juice industry, the main role of the DOC is to negotiate the tariff rates applicable for such products when negotiating Bilateral, Regional, and Multilateral trade agreements. For example, Fruit juice items exported under the HSC 2009 has free access to both India and Pakistan under the two FTAs mentioned earlier. The tariff rate applicable under SAFTA is also 5%. Since the general customs duty on such items is as high as 30-35%, exporting using these FTAs /PTAs would provide free market access to the target markets. The other main functions of the DOC particularly relevant to the referred export segment are; • Creating awareness among exporters on current market access opportunities under the Bilateral, Preferential and Multilateral Agreements. • Identifying prospective buyers specifically in the countries where trade officers are stationed. • Providing information on tariffs, regulations and other market intelligence. • Assisting exporters having disputes with respective parties to arrive at an amicable solution. Sri Lanka Export Development Board EDB has identified the food and beverage sector as a thrust sector to be developed and promoted. The EDB assists export targets by organizing Sri Lanka country pavilions at international food and beverage trade exhibition, B2B meetings in Sri Lanka and abroad, inward buying missions, outward mission etc. Trade exhibitions in Sri Lanka such as “Expo 2012”, “Reflection of Sri Lanka” exhibition parallel to CHOGM are also organized. Trends in the global market are subject to variations and the EDB carries out desk research to ascertain the current market trends and disseminate them to exporters. Assistance from Sri Lanka embassies abroad is also obtained to find buyers. Direct inquiries received by the EDB are published in the “EXPO News” magazine circulated by the EDB and encouraging potential exporters to find suitable buyers from this source also forms one of the components in the assistance programme. www.cbi.eu/disclaimer 44 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Annex III: Attendants at the Stakeholder Workshop, 6 November 2013. Name of the Organisation High Commission of India Nominated Persons Mr. S.P.Sapra Second Secretary (E&C) Dr. Sivaguru.M First Secretary Economic & Commercial Ministry of Industry & Commerce Mr. U. L. A. U. Perera Industrial Inspector Department of Commerce Ms Neranjana Gunawardena, Asst. Director of Commerce Ministry of Agriculture Dr. K.H. Sarananda Head/food research unit (Department of Agriculture) Institute of Fruit research & Development Dr. H.M.S.Heenkenda Director Sri Lanka Customs Ms. P. Wijenayake Sri Lanka Food Processors Association (SLFPA) D.L.W.S PUSHPAKUMARA (ASSISTANT SUPERINTENDENT OF CUSTOMS) Mr. Sarath Alahankoon 3rd Vice President BOI U.V.D.Manel Priyadarshanie Executive Assistant Exporters Association of Sri Lanka Ms. THILINI GNANASENA Executive – Quality Assurance, Sri Lanka Standards Institution Mrs, R.D. Munaweera, Senior deputy director, standard division) Mrs Mala Tennakoon. Deputy Director Pet Containers (Pvt) Ltd Mr. Rajith Wimaladarma Piramal Glass Mr. Thushara Deshapriya Senior Manager- Domestic Marketing Lanka Canneries LTD. Ishani Gunaratne Assist Manager Export & Administration Country Style Foods (Pvt) Ltd Mr. G. Y. P. De Silva Export Development Manager Tunip Lanka (Pvt) Ltd Anuradha Perera Export Sales Manager www.cbi.eu/disclaimer 45 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA CBL Upul Rajapakse Manager International Business EXPO Lanka Dushan Roberts Marketing Manager Edinbourough Mr. R.P.M.Zamly Managing Director , Roots Mr. C.L.Rajasinghe Paradise Beverages Mr. A. Kariyawasam, Partner Pristine Kokos (PVT) Ltd Mr Suresh Fernandez Jt. Managing Director BIZ+ VEGA Ms Tharanga Gunaratne National Agribusiness Council Mr. Aruna Weerakoon Chairman Coca-Cola Beverages Sri Lanka Ltd Mr. Ruwan Kumara SHEQ, Scientific & Regulatory Affairs Manager www.cbi.eu/disclaimer 46 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Annex IV: Persons Contacted CIC Holdings PLC Kasun Liyange GM Brands and Market Development 0774602924 355, Dutugemunu Mawatha, Peliyagoda, Kelaniya 199, Kew Road, Colombo 2. Web: www.cic.lk Coca Cola Beverages Sri Lanka Limited P O Box 1313, Tekkawatte, Biyagama Sri Lanka Rushika Perera Tunip Lanka (Pvt) Ltd Lot No.24, Ring Road 1,Phase 1, Export Processing Zone Katunayaka Sri Lanka www.onjusIndia.com. Lanka Canneries LTD. Mr.Nilhan Ekanayake - Export Manager P.O. BOX 341, Nawala Road, Colombo 5 Country Style Foods (Pvt) Ltd Mr Ranjan Senanayake-Export Manager No.57 St. Anthony's Road Kadawatha Cargills (Ceylon) PLC No. 40, York Street, Colombo 01. Luscious Food Products (Dairy Products and Fruit Drinks) T.M.M.Priyantha Gunasekara Anguruwella, Ruwanwella. Paradise Beverages Mr. Amaratunga Kariyawasam Partner 35, 2nd Lane Ratmalana www.cbi.eu/disclaimer 47 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Pahala Uva Agro Products (Pvt) Ltd Mr. Loranzu Hewage Eraj Trilanta Silva Director Badulla Road Bibile. Edinbourough Ms. Nadeesha Abeyrathne, No 12, Kolonnawa Road, Moragasmulla, Rajagiriya CBL Natural Foods (Pvt) Ltd Upul Rajapakse 156/2, Averiwatte Road, Heenatiyana, Minuwangoda, Sri Lanka. Dabur Lanka (Pvt.) Ltd Rukman Kumara Kururnegala Road Yakadagalla Estate Kotadeniyawa Roots 4-1A, 4TH Floor, Majestic city Colombo 04. Mr Fernando Pet Containers (Pvt) Ltd Mr, Sunil Wimaladarma Managing Director Mr. Rajith Wimaladarma No 7, Old Airport Road, Ratmalana Piramal Glass Mr. Sanjay Tiwari - CEO & ED 148, maligawa rd, rathmalana EXPO Lanka Mr. Dushan Roberts Marketing Manager 0773638451 dushan@expolanka.com 0112981616, 2981898 30/1C, New Hunupitiya Road, Wattala 127, Marbima Rd, Heiyanthuduwa, Biyagama Pristine Kokes (PVT) Ltd Mr Suresh Fernandez Jt. Managing Director Pinnalanda Estate Wtareka Padukk Teama www.cbi.eu/disclaimer 48 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Reindert Dekker, International Food Purchasing Expert Nutridant, Sao Paulo, Brazil Joern Berger Organic Expert Organic Service GmbH Munich Germany Benita Paul, Category Manager – JNSD Tetra Pak Inida Pvt. Ltd. Ranjana Kedia Kedia Fresh, RADHA KRISHNA IMPEX PVT LTD, New Delhi India Dr. Kaylan Goswami, Secretary General ALL INDIA FOOD PROCESSORS ASSOCIATION Dr. A.K. Gupta, Director BEDF Agricultural and Processed Food Products Export Development Authority – India (APEDA) www.cbi.eu/disclaimer 49 VALUE CHAIN ANALYSIS JUICES - INTRAREGIONAL TRADE SAARC: SRI LANKA TO INDIA Annex V: HS Codes simplified JUICE Fruit Orange Juice Lanka 8-digit HS Code CONCENTRATE Fruit Brix 20091900 Orange Concentrate Grapefruit Juice Apple Juice Mango Pulp (>3kg pack) (<3kg pack) Pineapple Juice Grape Juice Passion Juice Cranberry Juice Tomato Coconut water Mixture of Juices 20092000 20097000 20089910 20089990 20094000 20096000 Grapefruit >20 Brix at 200C <20 Brix at 200C Frozen, >60 Brix, bulk 270kg pack Frozen, >60 Brix, other pack <20 Brix >20 Brix Lanka 8digit HS Code 20097900 20097100 20091110 20091110 20092100 20092900 Other Single Citrus e.g. lime concentrate <20 Brix 20093100 >20 Brix 20093900 Apple >20 Brix at 200C <20 Brix at 200C >60 Brix, bulk 270kg pack >60 Brix, other pack <20 Brix, not frozen >20 Brix at 200C <20 Brix at 200C >30 Brix at 200C <30 Brix at 200C 20097900 Mango Concentrate Pineapple Concentrate Grape Concentrate 20097100 20091110 20091190 20091200 20094900 20094100 20096900 20096100 20098910 20098100 20095000 22029090/ 20098990?? 20099000 *20098090 has been cancelled and replaced by new, more specific juice category codes. Juice of any single fruit or vegetable other than apple, citrus, pineapple, grape, passion or tomato. This could therefore include fruits such as guava, lychee, cranberry, pear, pomegranate or kiwi. Since mango codes have only recently been introduced, it is likely that imported mango pulps and concentrates were also classified under this code. www.cbi.eu/disclaimer 50 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH SAARC Trade Promotion Network (SAARC-TPN) Narayani Complex, 4th Floor Pulchowk, Lalitpur P.0. Box 1457, Kathmandu, Nepal T: +977-1-5555289 F: +977-1-5521712 E: info.saarc@giz.org.np I: www.saarctrade.info Commissioned by
