Building Supply Chain Linkages for Food

Processing Industries
-PepsiCo Experience

2nd International Summit cum exhibition on Processed

Foods and Agribusiness & Beverages.
15 Sept 2010, New Delhi

Agenda

• Introduction

• Challenges- Indian Food Supply Chain

• PepsiCo’s advantaged supply chain model

1
 PepsiCo- Global Fact sheet

• Second Largest Food And Beverage Company

• Annualized Revenues Of Nearly $ 60 Bn

• Largest Portfolio Of Billion Dollar Food And Beverage Brands- 19

• Employs 285,000 People Worldwide

PepsiCo in India

! " # $ % % " #" && '

&

2
 Performance With Purpose
Promise of PepsiCo

(% )% *

+ )% * ,

)% *

Agenda

• Introduction

• Challenges- Indian Food Supply Chain

• PepsiCo’s advantaged supply chain model

3
 India – The Opportunity

• Largest cultivable land next only to USA- 170 MM Ha

• Diverse Agro Climatic Zones

• Largest producer of Fruits & Vegetables

• Second Largest producer of Staple food crops

Indian Agricultural -- Challenges

• Increasing volatility in Agri growth rates during last decade

4% growth Critical for a steady >8% growth of GDP

• Stagnation in productivity and farmer incomes

Development of high yielding varieties limited to few crops

• Post Harvest and Storage losses

• Depleting Water table and Energy crisis

• Small Farm Holdings & Regional imbalances

8

4
 Vicious cycle –Farmers

Low investment
Low quality inputs/age old practices

Role of
Government, Lower quality
Low Income Corporates to produce and productivity
Boom/Bust cycles help farmes to
break the cycle

No Market Orientation
No demand driven production
No higher pay for higher quality

Gaps in Indian Food Supply Chain

PRODUCTION
PRODUCTION SUPPLY
SUPPLY CHAIN
CHAIN PROCESSING
PROCESSING

• Highly fragmented • Low level of value

• Unproductive farms
• Inadequate storage& addition
• Low quality inputs
transport facilities • Low capacity utilization
• Poor Ext. services
• Loss of output • Higher costs
• Low level of demand • Higher costs make • Unviable for exports

driven production product unviable

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5
 New partnerships required to make
Supply chain viable and sustainable
• Policy support
• IPR protection
Government
Government • Facilitate introduction of new
technologies
• Policy to encourage and legally
protect contact farming.

Farming

• Demand driven
• Contract Farming
• Extension services production
•
•
Micro-credit
Insurance to de-risk
Company
Company Farmer
Farmer
• Market focus
• Part of Integrated
input cost Supply Chain
• Other services

11

Agenda

• Introduction

• Challenges- Indian Food Supply Chain

• PepsiCo’s advantaged supply chain model

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6
 Potato is our biggest raw material

13

India is the 3rd largest

producer of Potato in the world …
Potato Production (000 Tonnes)

India is BIG !!.

70300

32,000
29000 24500

11500

China Russia India USA Poland

However, In India, processed potatoes currently constitute less than < 5.0 % of annual production
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7
 Major Potato Producing States

KHARIF

10000 4%
Production ('000 MT)

8000
RABI
96%
6000

4000

2000

KARNATAKA
PUNJAB

GUJARAT
BIHAR
BENGAL

ASSAM
U.P

M.P
WEST

STATES
15

Transportation and Storage are the

two of the biggest controllable Post Harvest Losses

Potato Loss Chain (MM Tons)

0.46
0.68
1.54

1.02
29

24.82

Total Grading Loss Transportation Storage Loss Misc. Balance

Production

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" #$ % & '(((
) *+ ,
- './
16

8
 How PepsiCo dealt with the situation

• Built a Agri supply chain for Potato thru Contract Farming

• Provide Quality Seeds, Package of Practices, access to latest chemicals,

relevant cost effective mechanization, weather information and sharing of
best practices.

• Assured buy back of produce at pre agreed prices

• Facilitate financial and insurance services to farmers

•Build Modern Cold Storage Facilities

17

Engaging Stakeholders

Farmer Produce quantity and quality as per

Associations requirements
& Vendors
‘Pay for Performance’ systems to drive
quality and continuous supply
Govt
programs
Private.
Institutes

Directly with the

Banks & Farmer Farmer PEPSICO Collaboration
Insurance
Govt
Agri
Universities
Research

Agri Input
Companies
Advantaged seed

Storage
Extension services
Services
Quality based fixed buyback

“Partners in Progress” Model

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9
 Growing Partnership with Farmers

Qty Under contract (TON) 72000

No. of Farmers
12000

31000
5500
18000
11000
800
3000 125

2001 2003 2005 2009

2003 2004 2005 2006 2010

0
Area Under contract (Acre)
15000 '12 1((' '1((( 1((3

6250 4 5(( 4 '2(((

2000
800 4 1('( 6 7 8 9
2001 2003 2005 2010

19

Farm Practices : Change for Positive…

•Agronomy

•Disease Control

•Post Harvest Handling

•New Technology

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10
 Pure Seed and Right Variety –
First correct step

Choose and promote process grade varieties in collaboration with CPRI

Find geographical fit by conducting multi-location trials

Test resistance to Disease & Pests

Quality Seed Production to ensure purity

21

Set up a world class minituber facility

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11
 Extension services and Agronomic solutions

Improving the geometry has a significant impact on the Potato Size and Quality

…and Low grade automation to suit small farmers in India

Traditional form of earthing up using spades Simple power tiller can significantly improve
doesn’t provide adequate soil cover the quality of ridges and soil cover
23

PepsiCo’s Efforts in drip irrigation

in Potato
•- : $;
< =
> -
" - .
; /

! % ' ,

! % * 0 1 234&
5 4 6 4 7

! 8% 2
9 ' 7

24

12
 Determining Crop maturity by YSI

Fry Testing - Lab Sugar Analysis

Colour (L-Value) Sucrose
PAE Defects Glucose

NOT Ready NOT Ready Ready

25

Harvesting and field grading

• ;

;
6?@(("7
$
, A 6", #2B52 7
: '2

26

13
 Good Post Harvest Field Practices

27

Grading: Best practices

Tubers exposed to high temperature (>30-32 0c) develop sugar and can not be stored longer

28

14
 Spreading awareness

Farmers meetings
to create
awareness about Field
quality demonstrations
to show best
practices

Training tools…………..

29 Field Agronomist dairy Flip charts for educating farmers Leaflets in local language

Best Practices during Transport:

Padding and perforated pipes

Result of transport trial at Kolkata

Plant
A v e ra ge tr a ns it los s

18
16.1
16
14
12
10
%

8
6 2.9
4
2
0

Normal Truck Aerated Truck

30

15
 Creating Infrastructure :
Advanced Storage Solutions

31

Advance Technologies --Future

32

16
 Empowered Farmers

Traditional PepsiCo Result

Random and
Seed Advantaged Marketable crop
not pure

Age old POP, Disease

Agronomy Good crop
techniques Control
Harvest
Infrastructure / Protocol,
Post Harvest Traditional Higher Quality
Handling Field Quality
Check
High Costs (24- Tie up with SBI
Working Capital Cheap Credit
30%) (8% p.a.)
Assured
Volatile Assured buy Returns
Agricultural Risk Glut at peak back Weather
Insurance Protection from
arrivals
33 weather

QUESTIONS ?

34

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