India's fresh produce wastage tops 40 percent, top shipper says
Greg Knowler, Senior Asia Editor | Sep 07, 2015 5:07AM EDT
India's big supermarkets are unable to compete with the well-managed supply chains of the country's street hawkers.
HONG KONG — India’s fragmented distribution system and lack of packaging standards are contributing to an estimated $2.2 billion in wasted fruit and vegetables every year, according to one of the largest cold chain shippers in the country.
Tarun Arora, IG International manager of fresh import and distribution, said the fresh produce that was spoiled in India, known as shrinkage, was as high as 40 percent. Infrastructure in the rural areas was poor, and there was no standardisation of packaging in domestic distribution.
“This leads to huge wastage in fruit and vegetables. Distributors can use whatever packaging they want with no quality specifications that need to be followed,” he told the Cool Logistics conference in Hong Kong.
“There is a lack of connectivity and the entire supply chain needs to be integrated from end-to-end. The problem is that on the domestic side there is massive lack of technological development, even though we are one of the largest software developers in the world. There is an unwillingness among the local distributors to spend on technology.”
But there is another challenge facing the fruit and vegetable distribution market that will be even more difficult to overcome. Arora said major cities such Mumbai and Delhi had more than 20 million people, and even for the biggest producers the challenge was reaching the smaller areas within these cities.
“The traffic itself is very bad. Companies and supermarkets are using whatever delivery systems they can but nothing is really working. This is because the consumers still want to go to the street vendors that are managing their supply chains very well.
“The street vendor comes to our outlet in the early morning, he picks up his boxes and displays them at his stall. That is the freshest produce that you can get. So until all the supermarkets and modern retailers, and that includes e-commerce, are able to deliver the same result as the street hawkers, I don’t expect the buying preference to change. This is one of the most difficult areas to counter,” he said.
IG International handles more than 2,000 FEUs of fresh produce imports annually, and says its business is growing fast. Arora is expecting big things from the import market in the coming years.
“India is becoming a big monster that will absorb a lot of product in the next five years. I am expecting 15-18 percent annual growth in fresh produce imports in the next few years and I am not being too optimistic. The supply chains are getting better, and the cold chain and logistics is improving.”
But it is in the export arena where India underperforms dramatically. India accounts for two-thirds of world production of fresh produce, but the country is one of the smallest exporters.
“Bananas are a big disappointment. We are one of the largest producers of bananas in the world and we are 41st on the list of banana exporters,” Arora said. “India is also one of the top 10 producers of apples but 30th on the exporters rank. There is strong internal consumption, but there is no crop diversification and other varieties could be grown for export. Growers are just too focused on the domestic market.”
Arora said another significant problem facing fresh produce imports into India was the long transit times required. Transit time to Chile, one of India’s largest trading partners, is 55-60 days and has been the case for 15 years. When there is only a 9-10 week window in a season, this complicates the process.
“One of the reasons China has been able to generate such growth in its fresh produce business is because importers can land cargo in 20-25 days. If global shipping lines work on providing better transit times to India, we will see much larger growth in the market. But transit times from Seattle are at 40 days. Instead of decreasing, the times have in fact gotten worse,” he said.
The problems being faced by perishables shippers extend to all corners of the import market. Infrastructure shortcomings have long plagued India and contribute to inefficiencies within the distribution system.
However, Amit Dhingra, director of operations, India, for Menlo Logistics, said there were promising signs that investment in infrastructure was increasing, which would be highly beneficial to the logistics sector.
“This development will definitely be beneficial for a company like Menlo, as its key strengths are in managing larger warehouse spaces and operations,” he told JOC.com.
“According to research from McKinsey, India loses $45 billion a year due to inefficiencies in its logistics network,” Dhingra said. “That accounts for 13 percent of India’s GDP, compared to 9.5 percent in the U.S. and 8 percent in Germany.”
He said the development of logistics infrastructure was critical to India’s economic growth. “Modernising the national network of roads, railways and ports will be essential to support industrial and commercial development across the country,” the Menlo executive said.
Transportation bottlenecks are largely responsible for India’s inability to raise its profile in world trade. Recognizing the need to revamp the country’s freight system, the Narendra Modi-led government recently approved setting up a special-purpose company with equity participation of all major public port trusts and Rail Vikas Nigam, a subsidiary of Indian Railways, to develop new rail connectivity infrastructure in order to speed up cargo flow to and from ports.
Tarun Arora, IG International manager of fresh import and distribution, said the fresh produce that was spoiled in India, known as shrinkage, was as high as 40 percent. Infrastructure in the rural areas was poor, and there was no standardisation of packaging in domestic distribution.
“This leads to huge wastage in fruit and vegetables. Distributors can use whatever packaging they want with no quality specifications that need to be followed,” he told the Cool Logistics conference in Hong Kong.
“There is a lack of connectivity and the entire supply chain needs to be integrated from end-to-end. The problem is that on the domestic side there is massive lack of technological development, even though we are one of the largest software developers in the world. There is an unwillingness among the local distributors to spend on technology.”
But there is another challenge facing the fruit and vegetable distribution market that will be even more difficult to overcome. Arora said major cities such Mumbai and Delhi had more than 20 million people, and even for the biggest producers the challenge was reaching the smaller areas within these cities.
“The traffic itself is very bad. Companies and supermarkets are using whatever delivery systems they can but nothing is really working. This is because the consumers still want to go to the street vendors that are managing their supply chains very well.
“The street vendor comes to our outlet in the early morning, he picks up his boxes and displays them at his stall. That is the freshest produce that you can get. So until all the supermarkets and modern retailers, and that includes e-commerce, are able to deliver the same result as the street hawkers, I don’t expect the buying preference to change. This is one of the most difficult areas to counter,” he said.
IG International handles more than 2,000 FEUs of fresh produce imports annually, and says its business is growing fast. Arora is expecting big things from the import market in the coming years.
“India is becoming a big monster that will absorb a lot of product in the next five years. I am expecting 15-18 percent annual growth in fresh produce imports in the next few years and I am not being too optimistic. The supply chains are getting better, and the cold chain and logistics is improving.”
But it is in the export arena where India underperforms dramatically. India accounts for two-thirds of world production of fresh produce, but the country is one of the smallest exporters.
“Bananas are a big disappointment. We are one of the largest producers of bananas in the world and we are 41st on the list of banana exporters,” Arora said. “India is also one of the top 10 producers of apples but 30th on the exporters rank. There is strong internal consumption, but there is no crop diversification and other varieties could be grown for export. Growers are just too focused on the domestic market.”
Arora said another significant problem facing fresh produce imports into India was the long transit times required. Transit time to Chile, one of India’s largest trading partners, is 55-60 days and has been the case for 15 years. When there is only a 9-10 week window in a season, this complicates the process.
“One of the reasons China has been able to generate such growth in its fresh produce business is because importers can land cargo in 20-25 days. If global shipping lines work on providing better transit times to India, we will see much larger growth in the market. But transit times from Seattle are at 40 days. Instead of decreasing, the times have in fact gotten worse,” he said.
The problems being faced by perishables shippers extend to all corners of the import market. Infrastructure shortcomings have long plagued India and contribute to inefficiencies within the distribution system.
However, Amit Dhingra, director of operations, India, for Menlo Logistics, said there were promising signs that investment in infrastructure was increasing, which would be highly beneficial to the logistics sector.
“This development will definitely be beneficial for a company like Menlo, as its key strengths are in managing larger warehouse spaces and operations,” he told JOC.com.
“According to research from McKinsey, India loses $45 billion a year due to inefficiencies in its logistics network,” Dhingra said. “That accounts for 13 percent of India’s GDP, compared to 9.5 percent in the U.S. and 8 percent in Germany.”
He said the development of logistics infrastructure was critical to India’s economic growth. “Modernising the national network of roads, railways and ports will be essential to support industrial and commercial development across the country,” the Menlo executive said.
Transportation bottlenecks are largely responsible for India’s inability to raise its profile in world trade. Recognizing the need to revamp the country’s freight system, the Narendra Modi-led government recently approved setting up a special-purpose company with equity participation of all major public port trusts and Rail Vikas Nigam, a subsidiary of Indian Railways, to develop new rail connectivity infrastructure in order to speed up cargo flow to and from ports.
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