Newsletter N.11 – 26. March 2009

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Newsletter N.11 –                                                 26. March 2009

Òpera Consortium for European Excellence Program

1. Promising future of foreign food in India

At a recent food conference in Bombay, all the panelists shared their views on
whether India is ready to accept foreign food products.

India was described as a “market of contrasts”. One characteristics of India would
be that India, on the one side, is divided on various grounds, but also it is united in
projecting itself as a country bonded together by 'aspiration'. Considering this, the
Indian market has a good potential for international products demanded by aspiring

The fact was mentioned that the consuming patterns in India are changing.
Indians today are becoming more health conscious and a trend can be identified to
move towards packaged foods. According to one panelist, key constraints in the
Indian market today are cold chains, ability to supply, understanding the changing
Indian consumers, policies and duties.

Having a right value and suiting the palette of the consumers determines the
success of any food product -- be it Indian or international, according to K
Radhakrishnan, CEO, Reliance Hypermarket.

According to Ajay Gupta, MD, Capital Foods, a debate of “international' foods doing
well in India actually does not make sense." Reason is that the Indian food culture
is so diverse that any specialty of North India may be treated as a “foreign food” in
any other part of the country and vice-versa.

It was a common observation of the panelists that India has a market for niche,
premium and imported products but the important factor to be kept in mind is the
right kind of retail environment.
Newsletter N. 11 – Òpera Consortium for European Excellence Program

2.   No import duty on virgin olive oil, says government

The government has clarified in February that the import duty exemption on crude
edible oils would be applicable to virgin olive oil imports as well.

The government had allowed import of crude edible oils at zero duty from April 1
2008 to cool prices, but confusion remained on whether olive oil imports would be
able to avail the benefit, as olive oil was not clearly mentioned in the customs

In a circular, the Central Bureau of Excise and Customs has now clarified that edible
virgin olive oils that have not undergone any refining process are eligible for the
import duty waiver. However, oil obtained by solvent extraction from residue after
the olives have been processed to produce virgin olive oil will continue to attract
import duty.

India imports about 25,000-30,000 tonnes olive oil every year, mainly from the
European Union.

3.   AAHAR food fair held in New Delhi

Again this year, Indian Government body ITPO organized Aahar in the Pragati
Maidan exhibition complex of New Delhi, until a few years ago the only food fair in
India. The event was concurrently held with Hospitality India, a huge show for
gastronomical equipment and machinery.

Unlike the Hospitality, the Aahar food show was quite small and had only 62
exhibitors against about 100 in 2008. Also unlike the year before, there were
almost no public advertisement of the fair and no minister for the opening
ceremony as ministers were busy in campaigning for the forthcoming elections.

Newsletter N. 11 – Òpera Consortium for European Excellence Program

For the first time since long, ITPO took an entry fee of Rs 20, not much, but visitors
to Aahar and another fair on the ground (an Astrology fair) had to search for the
ticket counters behind the guard houses of the exhibition complex and had to
make their way over uneven ground.

The Turkish Hazelnut Organisation was present, but besides them, there was no
direct foreign exhibitor. The handful of exhibitors with foreign names like “McCain”,
“Puratos” or “Berry Callebaut” had come through their Indian subsidiaries.

Besides the Indian export promotion organization APEDA, which always collects
many Indian exporters in one pavilion with subsidized stand fees, there was only
one group participation from the US, mainly with agri-products like apples, prunes,
and some other fruits which had been organized by the local agents and

Newsletter N. 11 – Òpera Consortium for European Excellence Program

American companies are quite active in India. It might be interesting to mention
that American apples from the Washington state have reached a market share of
30% in India due to permanent marketing efforts in the last years.

4. India International Wine Fair

The India International Wine Fair held recently (March 16-18) in Mumbai was a
quite a small affair, if compared to other international wine fairs held abroad.

70 exhibitors from 15 countries drew nearly 800 trade visitors to the Grand Hyatt.
There was tasting of Bordeaux Grand Cru wines and wines from California; a

Newsletter N. 11 – Òpera Consortium for European Excellence Program

parallel conclave of speakers concluded that 2008-09 would be a difficult year and
that taxes needed to be lowered and that Indian food went better with Rieslings
rather than Cabernet Sauvignons, Alok Chandra of a business daily reported.

5. Grape Processing Board Launched in Pune

The Government has in March launched a Grape Processing Board in Pune,
Maharashtra. The Minister of Food Processing Industries, Shri Subodh Kant Sahai,
said that this board would provide a platform for the advocacy of Indian Wine
Sector. The Board will promote cooperative efforts backward and forward linkages
between growers and wine industry in general.

"The wine industry is in its budding stage in the country and so far has not been
able to establish any structure for the integrated development of the wine industry
on its own", the minister said in his speech. The wine sector was repeatedly
requesting for government support to put up an industry driven structure
for the overall development of the wine sector, hence the proposed Board
would have a totally industry driven structure.

The minister said that in view of the constraints faced by the evolving wine
industry, until and unless the Government takes a proactive initiative, the sector
would not be able to realise the true potential on its own. The proposed Board thus
is expected to boost growth of the sector, benefiting both the producers and the

The annual grape production in the country is estimated to be 1.6 million metric
tonnes and area under cultivation about 60 thousand hectares. Approximately 80%
of total production, irrespective of variety, is consumed fresh. Of the total grapes
produced in the country, only about 1% is processed into wine. The Indian wine
market was growing rapidly at 25-30% per annum for the last five years.

Newsletter N. 11 – Òpera Consortium for European Excellence Program

6. Italian Masterclass at the Taj Group in Mumbai

Michele Shah, writer and international wine judge, has recently conducted a
Masterclass along with Emilia Nardi, owner of a premier Montalcino wine estate
Tenute Silvio Nardi in Tuscany.

Organized through Aman Sharma, Food & Beverage manager of the Taj Group, the
masterclass was held at the Taj Mahal Palace and Tower Hotel in Apollo Bunder,
Mumbai. The aim was to explain the Italian wines from the area of production of
Montalcino, Tuscany, to the food and beverage staff of the Taj group, especially the
importance of Brunello di Montalcino in the hierarchy of Italian wines.

“Brunello is the king of Tuscan and Italian wines and sits at the peak of the
pyramid”, says Shah.

There were about 50 participants, among them.that Aman Sharma, Ms Shirin
Batliwala, Vice President Food & Beverage, and Siddharta Natu (Food & Beverage
Manager) in the masterclass which lasted almost to hours. Shah said in a report
that she found well trained professional staff that has a keen interest and a passion
for wine.

7. India seeks higher buffalo meat exports

Soon after the Cabinet gave its approval for the establishment of “National Meat &
Poultry Processing Board” under the guidance of the Ministry of Food Processing
Industries, the Cabinet Committee on Economic Affairs (CCEA) has in March
approved the proposal of the food processing ministry to launch a comprehensive
scheme for the modernization of abattoirs across the country. One of the aims is to
facilitate higher buffalo meat exports.

The scheme will provide facilities for scientific and less painful slaughtering, chilling,
effluent treatment plant, by-product utilization, water and power with required
sanitary / phyto sanitary conditions for modernization of abattoirs, the ministry said
in a media release. Modernization of abattoirs would also augment essential supply
Newsletter N. 11 – Òpera Consortium for European Excellence Program

base of hygienic raw material to the meat processing industry, both for domestic
consumption and exports, besides discouraging unauthorized slaughtering.
For the ministry for food processing industries the meat industry in India
has a vast scope for growth and development because of a large livestock
population. “Although India has acquired number one status in the world
contributing 13% of world milk production, the meat production is very low”, the
release states.

Total meat production is estimated at 4.9 million tonnes, standing eighth in rank in
the world. Buffalo in India contributes about 30% of total meat production. The
share bovine meat in the total meat production is about 60% as against small
ruminants (15%), pigs (10%) and poultry (12%).

India is currently the 5th largest exporter of bovine meat in the world, exporting
more than 500,000 MT of meats of which major share is buffalo meat. Buffalo meat
is regarded as healthy, due to its low content of cholesterol, and the ministry sees
the trend in the international markets where Indian buffalo meat is witnessing
strong demand due to its lean character and it’s near organic nature. According to
the ministry, Indian buffalo meat exports would have the potential to grow

8. Illegal blending of olein in edible oil brings higher margins

Newspapers reported that importers mix up to 30% of the material to maximise
gains. Faced with margins squeezing to “nil” because of rising minimum support
price (MSP) of oilseeds in the local agriculture and falling refined edible oils in
global markets, local importers make handsome gains by blending “olein” — a
cheaper alternative — with almost all (loose) edible oils.

Although blending olein with edible oils is illegal, almost 80 per cent — equivalent
to the oil consumed in loose form — sold in the country contains about 30 per cent
olein which is the liquid fraction of palm fruit which can be a severe health risk even
to the level of cardiovascular disease. Branded edible oils constituting about 20 per
cent of an estimated 13.5 million tonnes of the country’s total consumption, has
been so far kept away from such blending.

Newsletter N. 11 – Òpera Consortium for European Excellence Program

But, as the branded edible oils are sold at a premium of 10-15 per cent over loose
oil, the commodity is not preferred by consumers in rural areas.

Blending makes economic sense, says B V Mehta, executive director of the Solvent
Extractors’ Association (SEA), a 1,000-member body engaged in promoting edible
oils in India. Blending 30 per cent of olein makes refined oil cheaper by 12 per cent
which is much higher than the industry’s average margin of 2-3 per cent.
Therefore, barring a few national-level branded edible oils, almost all including the
state and district-level brands are available in blended form which is a matter of
serious concern, said Mehta.

With the practice initially started with a couple of local traders, it has spread across
the country resulting in a dramatic rise in imports of edible oil.

9. Strong rise of imports of edible oils

The latest data of the Solvent Extractors’ Association record a 68 per cent spurt in
imports of vegetable oils at 2.95 million tonnes in the first four months of the
current oil year (November - October) as against 1.76 million tonnes in the
corresponding previous period. The import of crude oil surged alarmingly by 46.45
per cent to 2.82 million tonnes from 1.51 million tonnes in the period.

Import of refined and crude edible oils (tonnes)
                            Refined       Crude       Total
Nov ’08                       137959        381073      519032
Dec ’08                       128540        590585      719125
Jan ’09                       142066        714624      856690
Feb ’09                        62612        667482      730094
Total (Nov ‘08 - Feb ‘09)     471177      23,53,764   28,24,941
Total (Nov ‘07 - Feb ‘08)      71315      14,41,380   15,12,695
Source: SEA

Newsletter N. 11 – Òpera Consortium for European Excellence Program

“The sharp rise in vegetable oil imports can be attributed to the dramatic fall in
international and local prices leading to higher stockholding and
consumption. However, low domestic prices have caused the resistance of the
farmers to sell their oilseeds. This has affected working of domestic industry during
peak crushing season,” said an analyst with one of the largest research firms.

The price of most edible oils are ruling at a very low level. RBD olein has become
the cheapest oil in the market and is being sold at Rs 320 per 10 kgs, pulling down
the price of all other edible oils. Compared to February 2008, groundnut oil is down
27 per cent to Rs 525 per 10 kgs, rapeseed oil lower by 18 per cent to Rs 485 per
10 kgs and soyoil by 29 per cent to Rs 430 per 10 kgs. Sunflower oil has witnessed
the steepest fall by 48 per cent to Rs 405 per 10 kgs.

10. Indian Rupee weakens further

The Indian Rupee has fallen further, reaching a new low of 68 Rs for 1 Euro at the
end of March. This slump increases import prices of foreign food products in India.

The Indian Rupee for years was relatively stable at a value of Rs 55 for 1 Euro.

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