Focus - Drinks industry growth fuels sustainability row in India
Indian environmentalists and farmers' groups are warning major drinks companies that, by transforming the country's horticulture patterns and changing its existing fruit supply chain, they are playing with fire. Raghavendra Verma reports from New Delhi.
New Delhi-based environmental activist Vandana Shiva is far from unusual in arguing that swift social and economic change caused by large scale earmarking of primary production could cause unrest. "We will see an aggravation of agrarian distress as the farmers will lose the [traditional] markets and grow the mono-cultures that are dependent upon costly seeds and pesticides," Shiva tells just-drinks. "There will be absolutely zero access of the poor person to the local produce and no access of the Indians to their [bio] diversity."
The drinks industry, however, argues that it is building reliable ingredient supply systems, benefiting consumers and farmers, while also being well supported by the Government. It does not foresee the problems suggested by environmentalists.
Maybe the only area where these two sides agree is that there has been a phenomenal rise in demand for processed fruit juices in India. According to the Federation of Indian Chambers of Commerce and Industry (FICCI), in the last five years the national sale of packed juices has grown by 40% each year and this has left drinks companies struggling to secure local ingredient supplies.
"The biggest challenge for us as a processor of fruits and vegetables is to secure good quality of raw material", says Sunil Deshpande, senior vice president (foods division) of Jain Irrigation Systems, a Mumbai-based agriculture company that signed a US$33m contract with Coca-Cola in June for supplying mango pulp.
Judging by production statistics it is difficult to comprehend this shortage. With 57m tonnes of annual production (2007, UN Food and Agriculture Organisation (FAO) figures), India is the second largest producer of fruits after China, and its diverse agro-climatic zones support production of fruits including mango, banana, apple, orange, grape, guava and pomegranate. However, traditionally-cultivated varieties in the country are unsuitable for processing either due to seed sizes, skin thickness, fibre content, acidity, sweetness or colour.
For orange and apple juices priced at around US$1.5 per litre in India, companies prefer to import concentrates from Brazil, the US, Israel and China after paying 30% import duty. However for mango - by far the most popular fruit drink in India - local producers are the major procurement base and account for 57% of the world's production. However, among numerous local varietals only Totapuri, Alphonso and Kesar are good for processing and a whole year's supply has to be procured in the months of June and July.
To deal with this sudden increase in demand, big processing companies are bringing in modern western techniques such as contract farming to boost their procurements and supplies.
Deshpande says that Jain Irrigation works with farmers in western and southern India to increase productivity and plantation area, rejuvenate old farms, promote fruit varieties suitable for fresh eating and processing, and make forward purchases at minimum support prices.
He rejects the idea that the activities of companies such as Jain and Coca-Cola could cause harm. Indeed, he says, through their efforts, farming earnings have risen substantially and the price of fruit juices has remained constant for over a decade. Indian farmers had long been exploited by the operators of the traditional supply chain, such as traders, brokers, aggregators and agents, he argues.
But this kind of comment has not pacified the critics. Kishore Tiwari of rural non-governmental organisation (NGO) Vidarbha Jan Andolan Samiti is concerned about the extra emphasis given to the farming of fruits and cash crops. In a country where poverty and hunger are still rife, he says, letting multinationals divert land from the cultivation of staple food could cause a serious food crisis.
Tiwari, whose NGO has been working with distressed farmers in eastern Maharashtra, warns that, "if these (fruit processing) companies engage in contract farming with unfair trade practices and do not ensure a fair deal for all the stakeholders than we are going to start an agitation".
Another concern is the possible negative impact of growing large-scale single crop farming on the biodiversity of the land. Shiva says that green groups have already started developing conservation seed-banks for local varieties of fruits and vegetables. "Companies like Del Monte want to turn our land into a low-cost production zone for the entire world", Shiva says.
However, Sameer Barde, senior director of FICCI, supports Deshpande's argument, noting that, in this emerging situation, "farmers are the rulers as they decide the price". Here, he highlights farms in southern Gujarat (north of Mumbai) and Madhya Pradesh state, in central India, where the number of processing units has doubled in recent years.
Deshpande also does not believe that food processors could one day corner all available produce and therefore run a real risk of agitation from the rural poor. "The pie is big, so everybody has a share", he says. Quoting industry estimates, he claims that, while consumption of mango pulp for processing has risen in recent years from 50,000 tonnes to 150,000 tonnes, this remains a tiny fraction of India's total mango production of 11m tonnes (2007 FAO).
This major untapped resource allows processing companies to keep expanding, he says. And this development needs investment and change. Presently, Jain Irrigation can source only 50% to 60% of its requirements through its direct farm purchase network, as transport costs for using orchards any further than 400km from a processing unit are economically unviable. According to Deshpande, "[Indian] agriculture [still] needs to modify to suit the requirements of the processing industry."
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