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Food Processing – Supply Chain Conflicts and Food Security (Video)

This is a recording of a short, candid talk by Devangshu Dutta (chief executive, Third Eyesight) at the ASSOCHAM’s 8th Global Food Processing Summit in New Delhi, India.

He touched upon the inherent conflicts in the food supply chain we need to be aware of before formulating policies and practices, and strongly urged everyone to look at food security from the point of view of sustainability and risk-management. (Transcript below.)

TRANSCRIPT:

I’ll just take just few minutes to share a few thoughts with you on the sector.

The session was titled “Make in India: Platform for investment opportunity in food processing sector and 100 percent FDI in food retail”.

As we all know, whoever’s been following the news, there’s all this buzz around FDI into retail being allowed, not only for physical retail but also for e-commerce companies, and there are two very strong sets of drivers. On the one hand is the likes of Walmart and Tesco and people who want to actually set up food retail. and you know food is the largest consumption in our basket of consumer products, so they obviously want to tap into that demand. The second side is Amazon and the likes of it where again you know there are no barriers in terms of location, you are buying on the net, tapping into a consumer who’s looking for convenience, and there you need to actually service that demand with food and grocery which is packaged, so there is obviously a very strong push a very strong lobby for that to happen. At the same time there’s a very strong lobby against that because there are domestic retailers who invested a lot of money over the last maybe 10-15 years in setting up a lot of retail stores. In the recent years there have been a few e-commerce companies that have come up as well with domestic and foreign capital. So there is this conflict.

In this whole ecosystem of food production and supply and retail there are some fundamental conflicts that we need to be aware of, before we get into any kind of thinking about what should be done with the sector.

First of all is foreign vs. Indian; this is a conflict which is there the world over, and I think we will see that increase in Europe, in the US, and in other places. You know, “local versus foreign” is a conflict which we will keep seeing. I think we have moved a little bit away from that within, not only this government’s regime but also the earlier government’s regime, where we started to welcome foreigners back into the country and said, “let’s do trade together”.  I think it’s important to keep it in mind that local interests will always always be take predominance over foreign interests. If any government comes in and says, “I will give foreign interests precedence”, it’s going to not be there in power the next time, so that’s something which is to be kept in mind.

The second is this is a conflict between large and small…large retailers versus small retailers. A Reliance had to close shops in Uttar Pradesh, had to close shops in Kerala because they were impacting small retailers. So it’s not just about Walmart impacting small retailers, it’s also about the large Indian companies impacting smaller companies.

The third conflict is between traditional and modern, and this is happening again even in farming. Indian farmers tend to follow traditional practices, there are fragmented land holdings, and then you have modern entrepreneurial farmers, you have cooperatives which are adopting different techniques, and there is a conflict which happens at that level as well. At the local level it can get hugely political and then it starts raising barriers. So if you talk about the food supply chain, it’s not a simple thing to deal with.

Fourthly, the biggest biggest conflict – and that’s not really a conflict outright because these are people who are working together – but there are differences of interests and, therefore, there are conflicts…that is between retailer, supplier and the farmer, the interests are not aligned. A retailer wants lower prices, a supplier wants even lower prices, but the farmer wants higher yield and higher prices, so that conflict, just something on account of price and commercial terms and various other things, is bound to create friction in that supply chain.

Having understood that, I think we need to also acknowledge the fact that retailers are unlikely to invest in the supply chain and in farming. Amazon is not going to set up food processing. Amazon is not going to set up farms which are contract farming. Let’s face it, even Future Group hasn’t. Future Group has set up a food park. Future Group has taken over companies which are in food production companies but Future Group has has not set up, ground-up, contract farming. They’ve tried but it’s not their core competence, it’s not even their core interest. Reliance has done a little bit, ITC has done a few things but it’s not something which is fundamentally their business. They’re retailers, that’s what drives them, so what they can do is they can create an ecosystem.

Let’s take the example of McDonald’s or a Pizza Hut or say a Domino’s. These are foreign quick service restaurants which have come into the country. A McDonald’s had to actually build its supply chain from scratch to get the potato fries, to get the burgers done, to get the patties done and they created an ecosystem, in some cases they invested or co-invested with Indian partners, but in most cases they encouraged Indian partners to talk to their partners from Europe, US etc.

When we talk about people like Future Group, it has done a lot in being a platform for Indian companies to come on board and sometimes international companies as well. They’re a platform for them to launch and grow their business. So what the retailer can do is create the ecosystem, create the demand pipeline. Beyond that it is up to the food producer, it is up to the farmer, to take that opportunity and move on. It’s not for the retailer to handhold from scratch all the way to selling on the shelves.

In terms of the practices that we need to adopt I’d like to say this, that while we keep talking about international standards, food is a very local thing. We may be going into a world where 50 years down the line all of us will be having a white-gray powder which has no flavour and that’s what the future of food…I hope not!…The fact is the food is a very local thing because of tastes, because of cultures, because of the environment that you are in. And we are actually losing a lot. People who are here from farming, if you look back not, even very far – maybe 20-25 years – certainly, if you look back 50 years, what was being farmed we’ve lost probably 30-40 percent of that produce, because there is no demand, because it is difficult to grow, because it’s seasonal, because it is difficult to process,  difficult to sell. If you go to the sabziwala today versus if we went to the sabziwala 10 years ago, you will find that the variety of produce has actually diminished. So while we are talking about food processing, what is happening is…and I’d like to mention this…You know, sometimes we come to conferences like this and we run our businesses, we run with a split personality. We do what is convenient for the business, we do what is good for the business in terms of cost, in terms of ease of processing, in terms of ease of selling etc. When it comes to us as consumers, we want fresh, we want variety, we want flavor, we want colour, we want all of it. Why do we have the split personality? Why can’t we actually combine the two and do what is right for us as consumers, our children as consumers, the environment, and the future as well?

Sustainability is should be a big driver and we forget that the kind of food processing which is going on right now, by and large the kind of plants which are being put up, are based on technology which was developed in North America and Europe between 1900 and say 1960-70. That’s been the most wasteful part of the last century in terms of energy, in terms of water, in terms of labour, in terms of anything. It’s resource intensive. Now imagine even if 20% of India – over 200 million people – started to live and depend on that kind of a lifestyle and that kind of an industrial structure! This country will be finished, certainly! The world would be finished! We cannot do that, so we’ve got to do stuff which is good for us as consumers, the environment as a whole, and good for the business. It can’t just be one. We cannot be uni-dimensional in our thinking.

Last point: I think diversity is a very, very important part of the food supply chain and diversity means that there are “many”. We tend to look at large companies as being the standard and, therefore, large being good. But the fact is that if you take food which is an integral part of our lives…You cannot live without air, you can live without food and water for a few days, you can’t survive. You can live without clothes for your entire life.

If let’s say the food supply chain and even the processing, the acquisition and everything else, if it gets consolidated beyond a certain point it becomes extremely vulnerable. Anybody who’s looked at financial services risk management or any any kind of risk assessment, you would know that it is good to have a diversified basket. From the point-of-view of farming, from the point-of-view of manufacturing, from the point-of-view of retail, consolidation beyond a certain point is actually detrimental to quality and to safety. So if you’re looking at food safety, if you’re looking at sustainability, we need to actually encourage many, many, many entrepreneurs, many small businesses.

For that…I don’t know if anybody is there from the government sitting in this audience…but Make in India will only happen if we make it easier. Today all of us who are in business know that India is one of the most hostile environments to do business of any sort. It does not matter whether you are in manufacturing, whether you’re a truck driver, whether you are running a consulting business. With all the regulations…we don’t lack regulation, there’s too much regulation…we don’t have an environment where it is easy to do business. If that can happen we will find that we will have an extremely diverse and vibrant ecosystem which will grow and we can actually be the standard, the international standard which can be followed by everybody else. I think what we should do is try and get the government to work in that direction. If we can do that, if that’s one outcome we can achieve out of this conference I’ll be really, really, really happy.

Thank you so much!

Opportunities & Challenges for Dutch (Semi-)Processed Food Companies in India

A seminar was organised on the 12th of May in Zeist (the Netherlands) on “the Opportunities & Challenges for Dutch (Semi-) Processed Food Companies in India”. Highlights of a report and other insights were presented by Devangshu Dutta, chief executive of Third Eyesight. Other entrepreneurs who also shared their experiences in India, and the Dutch agricultural counsellor, Wouter Verhey, was present at the event.

The sessions included:

  • Welcome and opening remarks by Wouter Verhey, Agricultural Counselor India & Sri Lanka at the Embassy of The Netherlands in New Delhi.
  • The market for processed food in India by Devangshu Dutta of Third Eyesight, India.
  • Entrepreneurial challenges in the food sector in India by Peter Uyttewaal, Partner India of Larive International. The characteristics and strengths of the Dutch Food and Grocery Industry by Sekhar Lahiri of FNLI.
  • Discovering the Pot of Gold in India by Sumit Saran of Future Consumer Enterprise Limited, India.

You can download a summary of the report via this link: India – Opportunities Challenges for Dutch Processed Food Companies

The Relationship between Consumers and Brands

Panel Discussion moderated by Mr. Devangshu Dutta, Chief Executive, Third Eyesight at the Indian Retail Congress 2015 (17-18 April 2015). The panel included Mr. Manish Mandhana (Managing Director of Mandhana Industries with the brand Being Human), Mr. Sanjay Warke (Country Head of Toshiba India), Mr. Tanmay Kumar (Chief Financial Officer of Burger King India), Mr. Kinjal Shah (Chief Executive Officer of Crossword Bookstores) and Mr. Ranjan Sharma (Chief Information Officer of Bestseller India, with the brands Vero Moda, Only, Jack & Jones).

Retail India and Etail India conference - Manesar - 2015-04-17

Social Investing in India: Landscape study & Investor perspective (webinar, video)

India has a rich culture and ecosystem of social enterprises, non-profits and many other social purpose organisations that serve the needs of many segments of society within a vast landscape. However, for a foreign investor looking for impact investing or other philanthropic opportunities in India, it can often prove to be a challenging journey. Devangshu Dutta (Third Eyesight/PVC Partners) and the Audrey Selian (Artha Platform) together provided a landscape overview of India, highlighted key challenges and pitfalls to look out for, and shared an insider view for international investors in this first part of AVPN’s India series.

Macro Consumer Trends: Implications for the Events Industry – (2014 March, Devangshu Dutta)

B2B event companies don’t often think about consumer spending as something directly relevant to their business. However, consumer trends can allow industry event and exhibition organizers to get an advance view of where the opportunities can lie in the future. In this Keynote address at UFI’s Asia Open Seminar in Bangalore, Devangshu Dutta shares his views about the key consumer trends in India, and the implications for the events and exhibitions industry.

(This presentation was delivered on 6 March 2014 in Bangalore, India.)

 

Leveraging Opportunities in Food & Beverage Sector

“Ingredients for Speed & Innovation” Conference 2014 gathered together senior delegates (CEOs/ CXOs) of the food & beverage Industry, on 7 May 2014 in Delhi. The event was organised by Third Eyesight in association with Infor India Pvt. Ltd. & Nagarro Software Pvt. Ltd.

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Devangshu Dutta, CEO, Third Eyesight

The conference was focused on the emerging opportunities for the companies in food and beverage sector amidst the challenging business environment. In his opening presentation, Devangshu Dutta, CEO, Third Eyesight reflected on the current macro-economic environment and the dichotomous changes in the consumer mindset. Dutta highlighted the need for companies to invest in developing advance insights, and to not only anticipate change but to seed ideas and invest in creating industry segments. Manish Gupta, VP Business Development, Nagarro provided insights on various technological solutions that have been engaged by companies that could enable companies achieve faster and better visibility into the data.

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Manish Gupta, VP Business Development, Nagarro

A panel discussion that followed discussed industry leaders’ experiences related to challenges faced with respect to demand fluctuations, demand fragmentation, complex supply chains for products with low shelf life, lack of homogeneity in food ingredients sourced through diverse geographic locations within India, as well as high levels of personnel attrition.

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Devangshu Dutta, Manish Agarwal, Arshad Siddiqui, Tarang Gautam Saxena, Manish Gupta

Manish Agarwal, Director, Bikanervala mentioned that while consumers are including other cuisines in their diet, they still prefer to have Indian food on a regular basis. Standing firm on its positioning of being a leader in Indian traditional snacks and QSR has helped his company to sustain business in these challenging times.

Arshad Siddiqui of Rasna Beverages shared the challenges related to diversity in India not only of the demand base but even the supply base. He highlighted how flavours of the same fruit vary across different geographic regions within India and adds to the complexity of maintaining consistency in the product range.

The conference was received well by the delegates who found immense value in exchanging thoughts on some highly relevant business issues.

Multichannel for Multifold Growth – Panel Discussion at the Delhi Retail Summit 2013

Organised by the Retailers Association of India the Delhi Retail Summit this year (10 May 2013) focussed on multi-fold growth for retailers utilising multiple channels to the consumer, with panel discussions and presentations by industry leaders who shared their experiences in exploiting the opportunities and dealing with the strategic and operational challenges of their varied businesses. Some snippets from the first panel discussion, comprising of the following panelists:

  • Devangshu Dutta, Chief Executive, Third Eyesight (Session Moderator)
  • Aakash Moondhra, Chief Financial Officer, Snapdeal.com
  • Atul Ahuja, Vice President – Retail, Apollo Pharmacy
  • Atul Chand, Chief Executive, ITC Lifestyle
  • Lalit Agarwal, Chairman & Managing Director, V-Mart Retail Ltd.
  • Rahul Chadha, Executive Director & CEO, Religare Wellness Ltd.
  • Sandeep Singh, Co-Founder & CEO, freecultr.com
  • Vikas Choudhury, COO & CFO – India, AIMIA Inc

 

1. Devangshu Dutta, Chief Executive, Third Eyesight (Session Moderator)

 

2. Atul Ahuja, Vice President – Retail, Apollo Pharmacy

 

3. Lalit Agarwal, CMD, V-Mart Retail Ltd.

 

4. Atul Chand, Chief Executive, ITC Lifestyle

 

5. Rahul Chadha, Executive Director & CEO, Religare Wellness Ltd.

Vicarious Pleasures of Awards

We didn’t get an award, but got the chance to give one away — the Coca Cola Golden Spoon Award 2011 for the “Most Admired Foodservice Retailer of the Year: Cafés & Juice Bars” to Costa Coffee (Devyani International). Congratulations also to the other nominees: Café Coffee Day, Jus Booster Juice, Mad Over Donuts, Baker Street, and Coffee Bean & Tea Leaf.

 Presenting the Most Admired Food Service Retailer - Cafes and Juice Bars

Eric Oving (Larive), Virag Joshi (Devyani International), Devangshu Dutta (Third Eyesight)

PHOTO CREDIT: IMAGES MULTIMEDIA

Delhi – A Growth Hub for India’s Apparel Exports

India’s traditional skills in textiles, intricate craftsmanship, and creativity in producing a range of design-intensive products have enticed buyers from all over the world. India retains a strong and sustainable position among the top five exporters of textiles and clothing in the world.

India’s textile exports are currently weighted in favour of raw materials and intermediate products leading to ‘value-leakage’, which is a major concern from the long-term competitiveness perspective.

Within India, Delhi holds a position of prominence and can play a significant role in capturing additional value within the country. As a sourcing destination and as a gateway to the rest of India’s textile and apparel sector, Delhi provides unique value in product development and design, and a tremendously flexible supply base.

This capability is especially critical in an unpredictable market where retailers and brands are looking to source ever-smaller quantities of product, increasingly closer to the season.

According to the Director (Merchandising) of one of the largest US retailers sourcing from India, “Delhi scores high on responsiveness, and is more enterprising. It has the capability to handle extraordinary fabrics and is strong in interpretations of artwork.”

The apparel cluster in Delhi-National Capital Region (Delhi NCR) includes locations across four states, and accounts for about twenty five percent share in the country’s current apparel exports. If Delhi’s apparel cluster were to be treated as a country, at US$ 2.6 billion (Rs. 12,000 crores) of apparel exports, it would fall within the Top-20 list, ahead of countries such as El Salvador, South Korea, Philippines, Peru and Egypt. Moreover, being a labour intensive industry, apparel cluster offers immense employment opportunities in NCR, already with current direct employment of over 1 million as per Third Eyesight’s estimate.

A study carried out by Third Eyesight has identified an additional growth opportunity of over US$ 5.5 billion (Rs. 25,000 crores) both in its current markets and products, as well as new product opportunities.

For many buyers, sourcing from Delhi NCR cluster is still restricted to beaded, sequined, and tie-dyed blouses, dresses and skirts. While Delhi remains strong in these products, it now also sells funky denim and jersey wear to young fashion brands, men’s tailored suits to American brands, and women’s undergarments to Europe.

Delhi now offers a base both to international buyers looking at buying finished products, and to Asian, European and American manufacturers looking at setting up alternative manufacturing locations that can tap international as well as the Indian market.

Going forward, the key stakeholders of the Delhi NCR apparel export cluster – individual companies, industry associations and the government need to urgently undertake adequate action steps as the competition is gearing up and the perceived strength of Delhi NCR cluster at the moment may not remain a USP of this cluster in the future.

The Delhi NCR apparel export cluster strategy report along with action steps and key implementation areas was presented at an industry seminar ‘Discovering Growth’ in New Delhi. The seminar was hosted by GTZ in partnership with Small Industries Development Bank of India (SIDBI) and Apparel Export Promotion Council (AEPC). The seminar was attended by the key stakeholders of the Delhi NCR apparel cluster including leading apparel exporters, buying agencies and retailers.

Corporate Responsibility – Beyond Babel

At the outset let me mention the fact that in the title of this post lies a Freudian slip. The intended title was “Corporate Responsibility – Beyond Labels”. But the new – unintended – title captures the thought perfectly. (And I’ll come back to that in closing.)

Third Eyesight was recently asked by a multi-billion dollar global consumer brand to facilitate a round-table discussion focussing on the issue of how to drive ethical behaviour and sustainable business models into their sector. This company has a well documented strategy and action plan until 2020, and their team was travelling together in India visiting other corporate and non-corporate initiatives, to learn from them.

For the round table, we brought together brands, retailers, manufacturers, compliance audit and certification agencies, craft and community oriented organisations and non-government organisations (NGOs working on environment stewardship. Some were intrinsically linked to the consumer goods / retail sector, others were not. Among those present was Ramon Magsaysay award winner Mr. Rajendra Singh of the Tarun Bharat Sangh, an organisation that has, over the last several years, worked in recharging thousands of water reservoirs leading to the rebirth of several rivers.

The diversity (and sometimes total divergence) in views among the participants was a powerful driver for the debate during the day, which was the main intention behind having a really mixed group.

(Try this experiment yourself. Get a bunch of people together who define their work as being in the “corporate responsibility” stream. Then ask them the meaning of that phrase, and watch the entirely different tracks people move on. You might be left wondering, whether they are really working towards a common goal.)

At the end, though, the result was productive, since the divergent perspectives opened avenues that may have previously not been visible.

In the case of our discussion, the topics that were covered included labour standards and compliance, reduction of the product development footprint, closed-loop supply chains, water management, organic raw materials, energy conservation and community involvement in business. Some of the issues raised were:

  • How are learnings from green factories consolidated and disseminated to other suppliers?
  • How do companies plan to continue to support sustainability and corporate responsibility initiatives considering the drastic economic changes and the dire retail scenario?
  • What does fair trade have to do with sustainability?
  • Minimum wage Vs living wage
  • Trade barriers and the need for government support for green products
  • Why labour laws are not being followed? Are the laws outdated and impossible to follow? Are there any other reasons, which could be dealt with by companies themselves?
  • Can consumer consciousness and pressures be brought to bear? Does the question “Is the product I am buying ethically produced” come in the mind of an Indian consumer? Or even to the mind of the Indian retailer?
  • The need to address the core issue of unbalanced demand and supply of workforce in cities.
  • What should responsible and aware companies do to stop other companies from polluting rivers and water systems?
  • The role of village craft in providing learnings on efficient and responsible use of resources

My view is that these diverse areas and views can be aligned most effectively if we look at responsibility and sustainability in all its dimensions. These dimensions, to my mind, are:

– The Environment

– The Community

– The Organisation

– The Individual

Most corporate responsibility / sustainability initatives end up addressing only one of the dimensions to focus and simplify the action-points. However, the reality is that there are many areas where the Environment, the Community and the Organisation overlap with each other – many a time, when you ignore the interaction between these dimensions, you get totally divergent opinions. And the point of view related to your own history, geography and experiences, further colour the opinion. The individual – “I” – as a citizen, as a corporate manager, as a parent of future generations, or in any other role, is at the overlap of all three external dimensions. That should tell us something about where the action needs to be initiated.
(The post continues under the graphic below…)

The Individual and the External Dimensions of Corporate Responsibility, Community, CSR, fairtrade, labour

(Post continuing from above.)

Here is a suggested list to start with, which we can use to try out thought-experiments, viewing each issue in different dimensions and from different points of view (for example, buyer based in a developed market, supplier based in a developing country, an individual working in the supply chain, his family and broader community):

  • child / family labour
  • fair pricing and fair compensation across the supply chain, including consumer, retailer, supplier, workers
  • replacement of cottage scale production with large-scale industrial production of goods
  • setting up production in cities versus in villages
  • organic versus inorganic
  • synthetic / genetically modified versus natural raw materials

In closing, let me come back to “Babel”. According to the Book of Genesis, a huge tower was built “to the heavens” to demonstrate the achievement of the people of Babylon who all spoke a single language, and to bind them together into a common identity. God apparently was not particularly happy with this self-glorifying attitude, and gave the people different languages and scattered them across the earth. 

Whatever your religious (or non-religious) affiliation, this story holds a gem of a lesson.

No matter how noble the cause of the corporate responsibility warrior, it is good to be humble and allow diversity rather than trying to capture everyone under one monolith with an apparently common goal. The diversity may be a lot more productive and help to spread the benefits wider than one single initiative.

The day that we spent on the sustainability round-table certainly demonstrated that very well.