Green products: How to set up Compostable Plastic bags business?

Compostable plastic bags are plastic bags that decompose into natural components such as carbon, water and biomass upon their contact with soil. As per DS6400, the most widely recognised international standard for compostable plastics, such plastics should completely disintegrate into natural components within 180 days in composting environment.

India generates huge amount of plastic waste (nearly 15,000 tonnes per day). It is estimated that only around 60 per cent of this waste is recycled and remaining gets dumped in the landfills and other places. Prominent among non-recyclable plastics are poly bags made from Polyethylene (PE), which can take up to 100 years to disintegrate.

Plastic bags have been completely banned in Maharashtra[1] (except for milk packets and some specific applications). Further, 17 States and Union Territories in the country have imposed partial ban on these bags with restriction on the thickness of the bags to minimum 50 microns. Increasing awareness about environmentally sustainable products along with restrictions on the usage of plastic bags have improved the prospects of compostable bags.

What are compostable Plastics?

Compostable plastics can be made out of bio based or petroleum based compounds (Resins) as shown below.

Figure1: Types of compostable plastics

Currently, the market for compostable resins is small, at around 1 million tonnes[2] (less than 0.5% of world’s annual plastic consumption of 320 million tonnes). These resins are patented by large multinationals such as BASF, NOVAMONT and have to be purchased from them or their dealers, thus resulting in higher price and limited availability. However, their consumption is predicted to grow at a CAGR of 20% over the next five years[3], and with the rise in demand, the availability of such plastics is likely to increase and their prices would become competitive.

How do compostable bags compare with conventional bags?

Compostable resins’ tensile strength, printability and weight bearing capacities are similar to that of conventional polymers such as Polyethylene (PE). In fact, in some specific applications, compostable resin may offer higher density and tensile strength as compared to  PE, thus resulting in requirement of less tonnage of the resin vis-à-vis PE.

However, currently, the compostable plastic resin is 2-3 times costlier than the conventional resins. Further, the costs of processing these resins into products such as bags are also higher due to smaller size of the processing capacities. As a result, these bags are 3 times as costly as conventional bags. For example, a medium size compostable garbage bags is currently priced at Rs. 220 (for a pack of 30 bags) as compared to a price of Rs. 70-80 for similar conventional bags.

What are the international and domestic standards for compostable Plastics?

There are a number of standards for compostable plastics including ASM D6400 (USA) and EN 13432 (Europe) and ISO 17088.

An Indian manufacturer of compostable plastic bags has to obtain a certification from Central Pollution Control Board (CPCB) for selling compostable bags and related products. The certification process requires the product to be tested in a government authorised lab to check its compliance to ISO 17088.

Table 1. International Standards for compostable bags
S.NoStandardization BodyStandard
1ASTM – American Society for Testing and MaterialsASTM D6400
2European StandardsEN 13432, EN 14995
3ISO – International Organization for StandardizationISO 17088

Is manufacturing compostable bags complex?

No, the manufacturing is very simple and is a two-step process; first the resin is processed into a film through a blown film manufacturing machine, the film is then cut, printed and sliced as per the bag sizes. Currently most Indian manufacturers use conventional LDPE blown film machinery for sheet extrusion. The resin is either directly imported from the manufacturers (list of bioplastic resin manufacturers is available in Table.2), or their dealers.

Table 2. Bio Resin manufacturers
S.NoCompanyCountry
1BASFGermany
2Bio-FedGermany
3CarbioliceFrance
4FKuR KunststofGermany
5NatureWorksNetherland
6NovamontItaly

Is there a market for compostable bags?

The demand for compostable bags is rising driven by growing concern about the environment and changing regulatory landscape. The waste management regulations in India are getting more stringent about handling and disposal of all types of waste including plastic. Therefore, specific segment of the market such as trash bags, bags for nurseries are witnessing a lot of interest from supermarkets, retail chains etc.

Given the demand, a number of new manufacturers have entered the market in past two years. The number of CBCB registered manufacturers of compostable bags has increased to 12 from just 2/3 a couple of years back ( a list of CPCB approved vendors is available here ).

The usage of other biodegradable/environmentally sustainable products is also increasing. Recently McDonald’s India has proposed to replace its plastic cutlery with a combination of wooden and biodegradable plastic cutlery ( available in this link: McDonald’s India kicks out plastics )

How much capital is required and what will be the profitability?

The capital requirements would depend on the machinery and the scale of operations. For example, a blown film machine of a capacity of 15-20 tonnes a month available for around Rs. 30 lakhs. However a European machinery (smallest capacity of 400 kg per hour) specifically made to handle bioplastics can cost more than Rs. 3 crores.

The minimum capital requirement including working capital is likely to be over Rs. 60 lakhs. The overall profitability and return on investment would be contingent on the manufacturer’s ability to secure regular orders and keep processing costs under control.

What are the key challenges?

  • Most states do not have a policy on regulation of usage of compostable plastic bags currently. The guidelines on allowing such bags in retail market would be critical for the growth of the industry.
  • The processing machinery is designed for conventional plastic, which can withstand higher temperature as compared to compostable plastics. Therefore getting the right product requires a number of trials.
  • The certification process for compostable bags is time consuming and can take up to 6-8 months.

[1] As per the circular, dated 10th July 2018 of Maharashtra Environment department, the compostable plastic bags are allowed for horticulture, agriculture, and handling of solid waste.
[2] Source: Global production of bioplastics, a publication by European bioplastics
[3] Source: European-bioplastics.org

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Business Opportunity in Turmeric Processing

Business Opportunity in Turmeric Processing

Turmeric (botanical name-Curcuma Longa), one of the most important spice crops in India, is used to colour and flavour the food products.The yellow pigmented fraction of Turmeric (Curcumin,)is used as a colourant in food products and also as an anti-inflammatory agent in medicinal formulations.

India is the largest Turmeric producer in the world, with an annual production of nearly 10 lakh tonnes, accounting for nearly 80 per cent of world’s production. In India, Telangana is one of the largest producers of Turmeric, followed by Andhra Pradesh, Tamilnadu and Maharashtra (see picture 1).

In FY 17, India produced 10.51 Lakh tonnes[1] of Turmeric, of which nearly 1.1 lakh tonnes valued at Rs. 1200 crores was exported. Additionally, India exported Turmeric based oleo resins and Turmeric oil, valued at around Rs. 400 crores.

 

 

Turmeric processing technology

Turmeric can be processed into two products Turmeric powder and Turmeric extracts including oleo resins and Turmeric oils.Turmeric oleo resins/oils are extracted through solvent extraction of turmeric powder. The solvent extraction plant can process a variety of spices including Capsicum, Pepper, Amla, Marigold etc. A plant of a capacity of 500 kg per day requires land of 20,000 square ft. and power load of 60 HP.

Since the extracts (oleo resins) are used in food preparation/pharmaceuticals and largely cater to exports, the oleo resin extraction operations have to be compliant with the USFDA, and European food safety guidelines. The companies that manufacture extracts usually obtain certifications such as HCAAP, Kosher, and Halal.

Key Players

Turmeric powder

The Turmeric power manufacturing is mostly done by micro enterprises and there are a number of players in each region. Additionally, most large spice powder manufacturers such as MDH spices, Everest Spices, Aachi Masala also sell turmeric powder.

Turmeric oleoresins and oils

This segment has a number of large players as well as SMEs.  The large companies extract oils from a number of spices and their products are targeted at export market. (See table 1). These are mostly based in Kerala, due to easy availability of spices. In addition to these large players, there are a number of SMEs that are spread across spice growing states such as Tamilnadu, Andhra Pradesh, Karnataka, Gujarat etc.

Table 1: Spice Extract manufacturers in Kerala
S. No.Company NameProduct RangeLocation
1.SynthiteValue added spice extracts and natural spice powderKolenchery, Kerala
2.Universal OleoresinsSpice Oils, Spice Oleoresins, natural coloursKochi, Kerala
3.Arjuna Natural ExtractsFormulations based on spice extractsAluva, Kerala
4.VD flavoursEssential oils from spicesKochi, Kerala
5.Plant LipidsSpice oils and oleoresinsKochi, Kerala
6.Kancor IngredientsOleo Resins, Essential Oils & Isolates, Mint, Menthol & Isolates, Floral Extracts, Speciality Ingredients, Organic Ingredients.Ernakulam, Kerala,
7.Plant Lipids.Spices and other Essential Oils.Kochi, Kerala
Source : FineTrain research

Key consumers of oleoresins in the domestic market include FMCG companies such as Hindustan Lever, Godrej, Colgate Pamolive, herbal products manufacturers such as Ayur Herbals, Dabur, Himalayan Drug Company, cosmetics product manufacturers such as Garnier Laboratories and pharmaceutical companies such as Dr. Reddys, Cipla etc.

Profitability and return on investment

The capital investment required for a Turmeric powder unit would be under Rs. 50 lakhs for a capacity of up to 2 tonnes per day. Since there is limited value addition in the powder manufacturing process and the manufacturer has to pay large commissions to distributors and retailers, the operating margins of such manufacturers would be thin and profitability would depend on their ability to sell large volumes.

Capital investment in Turmeric extraction capacity of 500 kg per day could be up to Rs. 2 crores. The profitability would depend on the spread between the oleo resin and Turmeric price and the yield of the extraction process.  A tonne of turmeric can yield anywhere 4-5% of extracts. Assuming that a tonne of turmeric yields 40 kgs of Curcumin (95%) and 30 litres of oil, the gross margin calculation is as under

Table 2. Turmeric Oleoresin Processing: Profitability
kgsPrice (Rs/kg)Value (Rs.)
Turmeric10009393,000
Solvents46,500
Total Raw material cost1,39,500
Oleo Resin4044981,79,920
Oil301003,000
Total revenue1,82,920
Spread (Oleoresin-Turmeric)43,420
Spread (%)24

Note: The prices of Turmeric and its Oleo resin are based on export data of 2017 provided by DGFT

The overall profitability and return on investment would depend on the producer’s ability to secure regular orders. Further, any value addition to the products by developing formulations based on the extracts can improve revenues as well as profitability.

Why Turmeric processing may be an attractive opportunity

Demand for Turmeric extracts is growing rapidly in foreign and domestic market. For example, India’s Turmeric extract exports have tripled over the past three years from Rs. 150 crores in FY 15 to Rs. 500 crores[2] in FY 18.

The infrastructure availability (cold storage, common infrastructure for grading and sorting of agri products) for food processing industry is improving as government is providing incentives for development of food parks/spice parks etc.  Further, food processing units are also being given incentives in the form of capital subsidies to set up and expand their businesses.

[1] Source: report on state wise/spice wise production by Spice Board Of India

[2]  DGFT data base: http://commerce-app.gov.in/eidb/ecomq.asp

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BUSINESS OPPORTUNITY – FLAVOURING ADDITIVES

Flavouring additives are used in Ready-to-eat, Ready-to-cook products and beverages to enhance or modify their taste. Broadly, there are two types of flavouring agents:

Powdered flavouring additives that are extracted from vegetables, fruits and meat. These are used across a number of products such as instant noodles, pizza, snacks, etc. They are low in moisture and thus are more stable and have greater shelf life. The common process of manufacturing these additives involves roasting, extracting, blending, drying, pulverizing, and sieving followed by packaging. Some of the examples of powdered flavours include noodle masala mix, dried vegetable powder, chicken extract powder.

Liquid flavouring additives that are typically extracted from plants and herbs. The process of extraction involves solvent extraction, distillation, filtration, sterilization, and concentration followed by packaging. Oleoresins, Aloe Vera extract etc. come under this category.

Products that typically use flavouring additives include bakery, dairy, fruit juices & other fruit based beverages, soups, salads and dressings (see Figure 1).

Industry

The Indian food flavour market is estimated at around INR 15.5 billion and has been growing at around 10 per cent per annum . The market has about 100 players , including large international and domestic players as well as many small and medium enterprises. Top international players and large domestic players account for around 70 % of the market share – these comprise Givaudan (Switzerland), International Flavours & Fragrances (IFF, US), Firmenich (Switzerland), Symrise (Germany), Takasago International Corporation (Japan) and MANE (France) and SH Kelkar (Pune), Sachee Aromatics (New Delhi), Oriental Flavours & Fragrances (Valsad, Gujarat). The main customers of these are large FMCG companies, tobacco manufacturers, ice cream manufacturers and pharmaceutical companies.

Why is flavour manufacturing an attractive opportunity?

The expenditure on food accounts for 43 per cent of house hold expenditure and is growing at an annual rate of 12-13 per cent . A steady rise in consumer spend on eating out and groceries is helping packaged food (ready to eat products, biscuits, and beverages) and the food service market (quick service restaurants, home delivery of food) , which are also experiencing growth in double digits . All these factors point to a growing demand for flavour additives.

Also, flavour manufacturing is a niche business, with entry barriers such as sustained R&D efforts, long customer acquisition time and access to raw materials.

Such businesses are likely to enjoy higher profitability vis-à-vis typical food processing businesses (juice extraction, snacks manufacturing etc), where bulk volumes are needed to generate profits.

Where are the domestic flavour manufacturers located?

Most of the flavour manufacturing units are located in Maharashtra, Gujarat and Kerala as these states offer proximity to end users and easy access to raw materials such as aroma chemicals and spices/herbs.

Down south, Post bifurcation, both Andhra Pradesh and Telangana have been focussing on developing food processing sector by offering financial incentives to food processing industry and developing industrial infrastructure. Although, these two states together account for almost 20 per cent of food processing factories in the country, they don’t have many flavour manufacturing units (see Table 1), thus making it an attractive opportunity to set up a flavour manufacturing units here.

Table 1: Flavour Manufacturers from South India
S. No.Company NameProduct RangeLocation
1Aromatic Chemical & Oil CompanyFlavours, Powder & Liquid Colours, Fragrances, Emulsions, Essential Oils.Visakhapatnam, A.P
2BOS Natural Flavours.Crystals, Dehydrated Products, Essential Oils, Floral Extracts, Fruit Extracts, Spice extracts.Kochi, Kerala
3Flavours IndiaFlavours for Beverages, Dairy & Tea, Ice Creams, PharmaceuticalsPondicherry
4Florale (India)Food Flavours & Additives, FragrancesBangalore, Karnataka
5Food Ingredient SpecialitiesFlavouring essences & essential oils for biscuits & other bakery products, Ice Creams, Aerated Water, Liquors & Beverages, Flavours for pharmaceutical Products.Chennai, Tamilnadu
6Kancor IngredientsOleo Resins, Essential Oils & Isolates, Mint, Menthol & Isolates, Floral Extracts, Speciality Ingredients, Organic Ingredients.Ernakulam, Kerala
7Lux FlavoursFlavours for Dairy & Bakery products, Essential Oils, Beverages and Flavoured Water, Confectionery, Savoury, Pharmaceuticals, Alcohol, Animal Feed and Meat Industry.Chennai, Tamilnadu
8Oror Flavours & ChemicalsFlavours & Seasonings in Bakery, Confectionery, Pharma, Milk & Milk products, Beverages & Snack Foods.Madurai, Tamilnadu
9Symega Flavours IndiaFlavours for Dairy and Bakery, Beverages, Confectionery, Pharmaceuticals & Savoury.Cochin, Kerala
10Plant Lipids.Spices and other Essential Oils.Cochin, Kerala
Source: From Fragrance and Flavour Association of India

Typical operating requirements

The cost of machinery and working capital needs for an entry level capacity of around 1 tonne per day would be around INR 2 crore. The machinery depends on whether the extract is in powder or liquid form. For extracting a powder, solvent extraction method is used, whereas for extracting a liquid (oil), apart from solvent extraction, distillation or super critical fluid extraction methods are also used. Table 2 shows the typical machinery required for an entry level plant.

Key success factors

Critical success factors for this business include:

  • Nimbleness in identifying new segments such as ready-to-eat foods, branded snacks, fruit-based/energy drinks for growth
  • Good relationships with exiting suppliers and customers
  • Building up a niche segment
  • A strong R&D team that can develop new products
  • Compliance with any changing regulatory requirements
Table 2: Typical machinery needs for a Flavour Manufacturing Plant
S. No.MachineryCapacityValue (Lakh INR)
1Solvent extractor / distillation unit/super critical fluid extraction unit5 ton/ day30
2Extract mixing tank2 ton3.5
3Automatic filling and packaging machine for powder3.2
4Pulveriser1 ton per hour1.5
5Liquid extractor10
6Recovery Unit5 ton per day5
7Spray drier50
8Shaking sieve1 ton per day0.8
9Powder mixer2 ton per day5
10Automatic filling & packaging machine for liquids5.5
TOTAL114.5

How we can help you

If you are interested in setting up a flavour manufacturing unit, we can assist you in the following:

  • Competitive landscape
  • Financial viability
  • Location analysis
  • Market entry strategy
  • Regulatory issues and government incentives
  • Detailed project report preparation
  • Support in project execution

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Neem coating of Urea : Attractive business opportunity for small and medium enterprises

Neem oil production a big opportunity for small businesses?

Neem oil production – attractive opportunity for small businesses?

The recent GOI (Government of India) directive to urea manufacturers to compulsorily coat 75 per cent of their urea with neem is likely to result in huge incremental business opportunity worth ~INR 5000 Crores for small businesses…

http://www.thesmetimes.com/index.php/extras/latest-news/2297-neem-coating-of-urea%E2%80%93attractive-business-opportunity-for-small-scale-industries-ssi-and-small-and-medium-enterprises-smes.html

 

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