ECONOMY OF SCALE OR MONEY POWER, WHAT IS KILLING THE SMALL PLAYERS?

At a time when India is debating about the merits and demerits of "inviting" multinational retail giants to do business in the country the old perception that "small is beautiful" seems to be gaining some traction, that too in a country like the US. After all Americans are the greatest practitioners of big scale operations in all spheres of their activities. Whether it is in the meat sector or the dairy sector Americans appear to be yearning for their past when every thing was in the small scale domain with higher quality products available unlike the present day commercial food dominance. With tremendous advance in food engineering and equipment design areas, mechanization and automation have reached great heights in recent years. Added to this, scarce and costly man power have facilitated such a transition in no small measures.  Whether this development has been good for the country is another matter. As most motive power which drives automation and large plants are heavily dependent on fossil fuels, it may be difficult to justify the trend. Added to this, centralized processing and distribution create a large carbon foot print considered the most causative factor in global warming. Here is an interesting critique on the effect of large scale displacement of small dairy players in the economic scenario in a state like New York which is worth studying for getting an insight into the consequences of mindless capitalism.    

"The report also found that the number of milk-processing plants in New York fell almost in half, from 61 in 1992 to 37 in 2007, and that other large dairy product manufacturing plants closed over the past decade. The declining number of plants made dairy farmers more dependent on fewer milk-processing companies and fewer, larger milk handlers, the study says. However, the report only focused on New York state, one of five separate case studies that show how the concentration of economic power can harm both farmers and consumers in different agricultural sectors. Other studies dealt with poultry production on Maryland's Eastern Shore; organic soy milk production and organic soybean farming; and the California processed fruit and vegetable industry. "The consolidation of the food and farm sector is sucking the economic vitality out of rural America and shipping it off to Wall Street,"Food & Water Watch Executive Director Wenonah Hauter said. "These findings shine a much-needed light on the negative economic impact that farm and agribusiness monopolies have on farmers, consumers and rural communities."

In India there was a time when succeeding governments since independence singing a familiar tune of encouraging and protecting small investors and for a number of years government had reserved over 700 manufactured  items exclusively for the small scale sector, barring big players from producing the same. Mahatma Gandhi's vision of using small scale players to achieve prosperity has been thrown to winds and India has the dubious distinction of courting crony capitalism from abroad in preference to the domestic players in almost all fields including food processing. Day in day out citizens are being bombarded with the slogan that FDI in retail sector would help Indian  millions of small farmers without any iota of logic or reality. Large behemoths have no relevance in a country like India where there are millions of small farmers and entrepreneurs eking out a living and it is only wise to adopt the old maxim "a bird in hand is better than two in the bush" when it comes to taking reckless risks!  

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com

THE "ACHIEVEMENTS" IN FOOD SECTOR PROGRAMS!-ANY TAKERS?

Glorious pictures about the achievements of Ministry of Food processing Industry are "painted and planted" among friendly media persons for country wide "splashing" and thereby get a good image in the minds of people about this highly bureaucratic set up at Delhi. Imagine what embarrassment it can cause to the Babus in MFPI when its own consultative committee has nothing but ridicule for the claims made by it every year at the budget time. Most heinous crime being perpetuated by MFPI is that in spite of its existence for almost two decades it did very little to create a reliable data base about the food industry and its figures are at best guesstimates based on heresay and unreliable sources. GOI must consider evaluation of the impact of MFPI on the performance and growth of the food industry by a blue ribbon committee of experts knowledgeable about all aspects of food processing and if its working in the past 22 years has been not satisfactory, it should have the courage to wind it up unceremoniously with no remorse! Here is a take on this issue.

"To which the committee reacted: "The committee cannot but, consider these achievements of the ministry with a pinch of salt, as their estimation is based merely on 'regular discussions' with stakeholders. Arriving at conclusions on such important matters on the basis of mere discussions throws a lot of light on the sanctity of the data flaunted in support and speaks volumes on the manner of working of the ministry in charge of the 'sunshine' sector of the Indian economy. The glaring absence of an information system for compiling data and indices pertaining to the food processing industry sector in the country, in spite of the ministry being in existence for two decades now, also reflects poorly on the planning and management capabilities of the ministry." Apart from lack of data, proper mechanism for systematic planning, and delay in execution have also been the concerns of the ministry."  

Of course many people unconnected with the food industry are benefited from the pedestrian existence of MFPI and these people are bound to protest. Even some industry players, cozy with the Babus in the MFPI may resist any attempt to close the ministry because of their vested interests. The still-born NIFTEM, touted to be a world class food technology institute is a classical example of the wrong priorities of MFPI and on top of this an undistinguished R & D set up in Tamil Nadu is being propped up as a high tech organization to solve all the problems of the industry. It is another thing that neither the food industry nor the food scientific community has any high opinion about the caliber of these organizations to deliver the required services to the proposed users.

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com

HIGH PRICED FOODS-A NEW GENERATION BUYERS

Does the inflationary pressure on foods affect all the consumers equally? If the present trend in the buying habits of consumers is any indication, many buyers are willing to spend double or triple the price of standard products if there are USPs with them. It is understandable that many young professionals with large amounts of money in their hands rarely look at the MRP printed on the label and their concern is only the quality of the product they are buying. Unlike the average middle class consumers of yesteryear who used to spend 40-50% of their income for buying groceries and food, to day's average consumers spend only about 20-25% of their income on these daily needs because  of high salaries drawn by them. Especially in cities like Bangalore, Pune, Hyderabad, Chennai, Trivandrum etc where there is a considerable concentration of IT professionals with high monthly income, price of a product is never the critical factor that influences the buying decision. Under such a splurging environment consumers in general are "infected" with a desire to buy high priced products, generating more demand for new products with distinct personality and foot print. Is this going to be the drive engine for the growth of food industry in India in future? In all probability this may be true.  

Inflation is all around us. Every visit to the market brings shock at newly raised prices. So would you then voluntarily pay Rs 75 for a litre of milk when you can get a packet for Rs 25 or a tetrapak for Rs 44? Or Rs 60 for a loaf of sliced bread when you can get one for Rs 16? How about Rs 50 for six eggs that might cost Rs 24 otherwise? Or Rs 50 for a bottle of water that might otherwise cost around Rs 15 - and not for imported brands like Evian, whose prices might soar due to excise duties and the falling rupee. All these prices are for shudh'Indian products only. Of course, they are hardly run-of-the- mill products. The Rs 75 milk comes from a herd of Holstein cows at a farm at the foot of the Sahyadri mountains not far from Pune. It is packed under absolutely hygienic conditions and rushed to Mumbai, reaching the city just 8-10 hours after milking (regular milk takes 36-48 hours). And no time is spent on shop shelves because the bottles are delivered direct to the doorsteps of consumers who have subscribed to the service, which currently operates in south Mumbai only. DANZ bread also goes direct to consumer. The product, now being test marketed in Mumbai, claims to be made from a mix of five wholegrains and seeds, with no potentially-harmful chemical additives, and will reach you two hours from being packed. Keggs is the brand name for eggs with distinctive light brown shells that come from special chickens raised by low-income farmers, who let the birds range around and eat a mixed diet, the exact opposite of the cramped, unhealthy battery farms that produce most eggs. Keggs are not home delivered, but are sold at gourmet food stores in Delhi and Mumbai". 

Recent news reports that more than 40% of the food manufacturers in the organized sector are poised to increase the consumer prices of their products to avoid slipping into red due to all round escalation in input costs during the last two years, are not surprising. Some of them have used the "optical illusion" to lower the contents of a food packet without reducing the over all size of the pack and retaining the price, giving an impression to the consumer that they have maintained the price level, in spite of inflation! Take a simple case like the Glucose Biscuit where unit packs of Rs 2, 3 and 4 are very popular and in the lat two years the contents in these popular packs have come down by almost 25% with the biscuit size also reduced while the price is maintained at the same level. Probably such price manipulations may eventually make the middle class accept the inevitability of spending  higher percentage of their income on the daily needs to keep their body and soul together.

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com