This article is based on a presentation at the 2nd International Summit of Processed Food, Agribusiness and Beverages, organised by the Associated Chambers of Commerce (ASSOCHAM) and supported by the Ministry of Food Processing, Government of India. The presentation was made to a mixed audience of retailers, manufacturers, farmers, government functionaries and service providers, and rather than provide answers, the objective was to raise questions that were not being discussed.
The old saying goes: where there are issues, there are opportunities. By that standard, the perishable commodities supply chain offers plenty of issues and, hence, opportunities.
Part of the problem, or opportunity, is that there are so many steps between the farmer and the consumer, so many hands through which the produce passes, especially in the case of India. With every step in this supply chain, there is the potential of waste and deterioration with time, and on the flip side, there is also an opportunity to add value and improve.
Misalignment on Motivation
One core issue, at the heart of most problems with the perishables supply chain, is widely different perspectives and the lack of alignment.
For instance, there is competition at the basic level between cities and villages. But there is even misalignment between the development needs of ever-growing cities that are taking over neighbouring agricultural lands, and the need to feed people living in those very cities. Similarly, the motivations for small sustenance-driven landholders are different from those of the wealthier farmers with large holdings. And, of course, within the supply chain, the tug of war is between consumer vs retailer, retailer vs brand, brand vs producer.
This is but natural in any economy, even more so in India whose rapid growth is widening the already existing gaps and intensifying the inherent disconnects.
Misalignment on Value
However, there is also another significant potential misalignment, of which we need to be keenly aware. This is in the very definition of value.
Given that we have been discussing “value-addition” as a driver for the food supply chain, I think we also need to understand that the word value has various connotations and implications, depending on who we are speaking about. Each throws up different challenges, and needs to be dealt with differently.
In my mind, the three aspects of value related to the food sector are:
The complication is that these three aspects address three very different audiences in society.
For a large part of India’s population, simply providing adequate calories is the main problem. For this chunk of people, not only do we need to have more productive land under use, we need to maximise the output from each piece of land, and ensure that the productive output reaches the population that needs it the most. Within that, there are several social, political, logistical and economic challenges to tackle: clarity of land-holding, availability of arable land to agriculture rather than non-agricultural uses, unit area productivity with efficient use of other resources, safety during transportation and storage, and distribution at prices that are affordable.
Nutritional value is the next step up: packing more nutrients into each gram of produce and delivering the right mix and balance is a critical issue for consumers who get enough calories, but can benefit hugely in physical and mental health through the quality of the nutrition they are taking in.
In pushing up both calorific and nutritional value, we also run into two entirely different debates.
One is whether genetic modification (GM) is desirable. The argument against GM foods is that we shouldn’t tamper with the most basic building blocks of biology, because we don’t understand the implications completely. The powerful argument for GM is that it is a must, to ensure that we have enough and ever-improving food available to a growing population.
The second debate is about organic produce. The organic camp believes strongly that organic is better, nutritionally superior. The other side argues that organic delivers no clear demonstrable increase in either calories or nutrition, and instead pushes production down and prices up: a recipe for complete disaster in a growing country.
But most interesting to me is the fact that in most industry platforms such as this, when we speak of “value-addition”, it is neither calorific nor nutritional value that is being targeted, but only economic value.
Obviously, companies are profit-driven by their very nature, and if calorific or nutritional value does not deliver economic value to them, they will not focus on those aspects. For that reason, most companies engaged in or being encouraged to participate in the food supply chain do so through food processing: the transformation of the basic produce into a manufactured packaged product with higher economic value per gram. A thinking consumer may be tempted to ask, am I getting proportionately better food (especially more nutrition) for the extra unit value that I am paying for orange juice (as compared to oranges), ketchup (as compared to tomatoes) or chips (when compared to potatoes)?
My concern is that such a deep misalignment in the definition of value can cause a huge amount of friction and potential politicisation, especially if only one aspect of “value-addition” is constantly in focus.
Misalignment on Losses
I’d also like to briefly comment on another aspect of value: losses.
We’ve all come across the much-quoted “fact” that in India 30-40% of the agricultural produce is wasted. That’s incredible! A country otherwise so frugal pushes a third of its valuable food into the gutters? Can that really be true?
I have not come across any authoritative study that clearly demonstrates that India actually wastes that much food.
Of course, there is wastage due to improper harvesting, lack of post-harvest processing and gaps in the storage and transportation infrastructure. But that figure, depending on what product and part of country you pick, varies hugely and the overall average is nowhere close to the 30-40% figure.
Overestimating the size of the problem leads to overestimation of the opportunity, and that misdirects investment. I think the correct way to look at the issue is not just in terms of value-lost, but in terms of opportunity lost. There is certainly an opportunity for farmers to grow their incomes by ensuring that better agricultural and post-harvest techniques are followed. If harvesting products at the right time, chilling the produce at the farm immediately, adequate sorting and grading, or even the simple act of washing can lead to higher prices for the farmer, I’m all for it.
The opportunities we are missing may be bigger than the waste that we imagine.
The Drivers of Value
Obviously, the technological, political and business mandate changes dramatically, depending on where we want to focus on building value. Is it to increase, improve, protect or change the produce? Are we going to focus on the seed, on growth, on harvest and post-harvest, on processing, on storage, on packaging or marketing.
Given the diversity of the questions, I think the discussion on value should also include – openly – a widely inclusive group. Obviously large corporate retailers, brands and producers, and the various arms of the government would be part of the discussion, but the table should also have room for farmers of every hue, technology innovators that address not just aggregated large land-holdings but also small farms, and platforms that encourage both ultra-modern and traditional knowledge, both from within India and outside.
By focussing on an over-simplified view of “value-addition”, we risk not addressing fundamental issues. In fact, we could be losing sight of humongous opportunities.
In the food supply chain, we are dealing with a product that is perishable; given our economy’s rapid transformation, the opportunities are perishable, too. We should get cracking.
(To download the PDF of the presentation, please click here.)