Business Opportunity – Amla Processing

Amla or Aonla commonly known as Indian gooseberry, is known for its medicinal properties. It is used across a number of industries including Aurvedic medicines, Cosmetics and Food products.

The production of Amla was 9.89 lakh tonnes in FY 17, with majority of it coming from Uttar Pradesh (UP) and Madhya Pradesh (M.P).

Figure 1: Amla production and top producing states[1]

What are the key Amla based products and its manufacturing process?

Amla Candy: Amla candies are made by cutting the fruit and coating it with sugar syrup at different brix values. The fruit pieces are then dried to bring down the moisture content and coated with sugar powder, to prevent them from sticking to each other.

Amla Supari: The process is similar to that of the candy. Natural colouring agents, flavours such as mint & dry fruits are added for taste and appearance.

Amla Juice: Washed Amla fruits are transferred to shredder, Amla juice thus extracted, sterilized and packed in bottles.

Amla Powder: Amla powder is used in herbal & cosmetic industry. The fruit as a whole is dried, pulverised and packaged as per the requirements.

What is the machinery and capital required for Amla processing?

Amla processing doesn’t require large investment in machinery and infrastructure. The machinery and capital requirements are presented in Table.1

Table 1: Budget for Amla processing plant
ProductUsage/MarketMachineryTotal Budget
Amla CandyRetailAmla breaking machine, steam jacketed kettle, tray dryer and packaging machine.The budget including machinery for a capacity of 1 tonne per day and working capital would be ₹40 lakhs
Amla Supari
Amla JuiceRetail & CommercialAmla shredding machine, hydraulic press, storage tank with steam jacket and packaging machine.The budget including machinery for a capacity of 2 tonne per day and working capital would be ₹20 lakhs.
Amla PowderRetail & CommercialDryer, pulveriser and packaging machineryAmla powder making plant can be established within ₹ 10 lakhs

Why Amla Processing is an attractive opportunity?

Growing popularity of alternate medicines, health foods and herbal products are driving the demand for Amla based products. The potential for Amla extract as a food ingredient is increasing significantly, owing to the growing global nutraceuticals and functional food market.

As per a report by consumer data analytics firm Nielsen India, sales of personal care products made of natural, herbal and Ayurveda ingredients are growing 1.7 times as fast as the overall market. Given the shift towards natural products, large consumer goods companies such as Colgate, Hindustan Lever are also introducing natural variants of their products. Since Amla is a rich source of vitamin C, a very powerful antioxidant and anti-ageing vitamin, usage of Amla in cosmetics and food products will continue to grow, thus making Amla processing an attractive opportunity.

What are the challenges?

Amla is a highly perishable fruit with a short shelf life of 5-6 days. Hence, the plant runs only during the harvesting period i.e. from October to February. The plant can be used to process other products such as Fruit based bars (Guava, Mango, Pineapple, etc). One may need to invest in addional machinery such as peeler/ pulper/mixer depending on the fruit.

Other challenges for the new entrants is to create a market for their brand, which will have to compete with the well established players. Based on the product portfolio, retail network has to be established.

How can we help?

We can help you start an “Amla Processing Unit” through a number of services including viability assessment, market landscaping, technical consultation and project execution support.

[1] Horticultural Statistics at a Glance 2017 – National Horticulture Board

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Plastic Products export:Opportunities for SMEs

Introduction

Plastics are the 6th largest traded products, globally.  Indian plastic exports are estimated to be around $ 7.6 billion[1] (Rs. 45,000 crores), accounting for around 3 per cent of our total exports. Top destinations for Indian plastics include USA, China, UAE and United Kingdom. There are over 2300 exporters[2] in India, largely located in Maharashtra and Gujarat. The exporters include both large manufacturers such as Garware-Wall Ropes Ltd, Supreme industries Limited and a number of small and medium enterprises.

Figure 1: Plastic exports-product wise and country wise breakup

Source : Plastics Export Promotion Council

[1] In FY 16

[2] There are around 2300 exporters registered with the Plastics Export Promotion Council

Raw materials (polymers) account for around 30 per cent of our plastics export and value added products for the remaining 70 per cent. Among value added products, plastic sheets, woven sacks, table and kitchenware are the key products.  The exports of these products have increased at a CAGR of around 12-20 per in the past decade (Table 1)

Table 1.  Growth in key categories  of Plastics (INR crs.)
HS codeItem2006-072016-17CAGR (%)
39269099Miscellaneous plastic products315.822,093.4120.82
39232990Plastic sacks bags439.731,964.3116.15
39269080PP articles such as woven sacks226.711,191.7318.05
39239090Plastic articles for conveyance and packaging such as crates160.16615.8114.42
39219099Plastic sheets, films, foils strips, plates, etc.30.33575.6934.22
39241090Tableware Kitchenware55.58505.7824.71
39219096Laminated Flexible packaging items (plates, sheets, films, foils, strips. Etc.)58.93393.8420.92
3917Tube , Pipes and Hoses and fittings284.99947.1912.76
39241010Plastic insulated Tableware Kitchenware89.81386.2415.71
Source : Directorate General of Foreign trade

How To Tap The Export Market

Entering the foreign requires a lot of preparation towards market research and product development, as the products have to meet the requirements of new customers, who may have different standards of quality, design and product packaging.  Also, diversifying into exports entails extensive documentation of company’s processes related to quality, purchase and sales, thus requiring a few dedicated resources. As such, venturing into export market comprises following steps:

Select The Market

Markets can be selected based on size of the opportunity, ease of entry and company’s competitiveness vis a vis other suppliers. The below given graph highlights key markets for various plastic products.

Table 2. Top  export markets  for key Plastics products
HS codeItemCountryCountry’s share in Indian plastics  exports
39269099Miscellaneous plastic productsU. S.21%
Canada6%
UAE4%
39232990Plastic sacks & bagsU.K13%
U.S.A8%
Canada6%
39239090Plastic articles for conveyance and packaging such as plastic cratesU K12%
U A E10%
U S A9%
39269080PP articlesU S A61%
Spain5%
Brazil5%
Source : Directorate General of Foreign trade

As can be seen, the key markets are different for each category of product, for example in FY16, UK accounted for the highest share in exports for plastic bags and sacks, whereas USA was the largest buyer for polypropylene (PP) products.  One can do a detailed market analysis to understand the key consumer countries as well as other suppliers that are supplying to the same market and the competitiveness of your goods vis a vis other suppliers.The competitiveness of the product also gets impacted by the trade and non-trade barriers as explained below.

Trade Barriers

These refers to custom related tariffs, anti-dumping duties that are imposed on the imported products by the countries so as to protect their domestic industry. For example, recently Govt of USA announced its plans to levy a tariff of 25% on imported steel and a 10% of Tariff on imported Aluminium products from a number of countries except Canada, Mexico.

However, the import tariffs are typically lower among trading partners who are party to different agreements such as Free Trade agreements (FTA), Comprehensive Economic Agreement (CEA) etc.   For example, India has trade agreementswith a number of countries including ASEAN, whereby the tariff on a number of products among the ASEAN countries is gradually being brought down to zero. Many of ASEAN members are importers of plastics (HS code 39) and India currently has very limited share in these markets (see Table 4), thereby presenting an opportunity.

Table 3. Plastic imports by ASEAN countries , 2016
CountryCountry wise Plastic imports from the world ($ mn)Country wise plastics imports from India ($ mn)Share of India  in plastic  imports
Indonesia6999.8096.801.40%
Malaysia6827.6032.100.50%
Myanmar582.608.301.40%
Philippines3061.6014.000.50%
Singapore6687.3049.300.70%
Thailand8034.2081.001.00%
Vietnam9614.6087.800.90%
Source : Strengthening ASEAN-India Partnerships: Trends and Future prospects, a report by Export-Import bank of India
Non Trade Barriers

These refers to legislations/other technical requirements that make it very expensive for Indian products to access a particular market. For example the cost of certifications of food grade plastics products in US and Europe are high at around $ 4000-5000 per product per year[1], thus making it very difficult for Indian SMEs to target these markets.

As such it may be easier for a new exporters to start with Asian markets, where the customers’ preferences are similar to India. However a detailed analysis of market size and competitiveness of our products vis a vis other suppliers is a must.

Market Entry Strategy

Having selected the market, a company can choose to enter the market by directly contacting the buyer, selling to a local distributor or participating in a joint venture with a local partner.The trade fairsand buyer’s sellers meet are commonly used by SMEs to identify the buyers as well as test market their products. Some of the trade fairs related to plastics industry include National Plastics Exhibition (NPE), USA, Chinaplas (a plastics and rubber trade fare in China) and Plastindia (Plastic trade fare in India).

The ministry of MSME offers a number of schemes to exporters for market development assistance including exposure visits to foreign markets and concessions in stall charges and air fare to participate in exhibition. These schemes are administrated by Plastics Export Promotion Council (PLEXCONCIL) or Federation of Indian exporters (FIEO), who also organise trade fares in India and facilitate meeting with international buyers.

Meet The Technical Requirements

The exporters need to comply with the technical requirements of the destination country and obtain relevant product certifications. These certifications can be broadly divided into two parts: certifications related to process and safety such as ISO and product related certifications.In general, product certifications required for US and Europe markets are more stringent than those needed for Asian, African and other markets. A summary of important certifications across plastic products is provided below.

Table 4. Technical Certifications  for plastics products
CountryCertifications
Injection moulded productsISO  and product certification based on applications
Pipes and fittingsWater Regulation Advisory Scheme (WARS) for UK, NSF for USA, DVGW for Germany
Food grade plasticsUS FDA guidelines, European Commission (EC ) guidelines
ToysConsumer product safety improvement act (CPSIA) in USA,  EU Toy Safety Directive in Europe
Woven sacksLabour data certificate for FIBC (Flexible intermediate bulk container)
Source : Discussion with NSF officials  and FineTrain research

Estimate The Capital Investment And Profitability Of Export Market

The costs can be divided into two categories:  fixed cost and variable costs. The fixed cost or capital investment required for the export market would depend on the product adaptations/customisations, certification costs and working capital requirements.The working capital cycle can be up to 3 months including the time realised in getting the payment from the buyers as well as for claiming refunds/incentives from the government.

The price of the product in foreign markets should factor the costs such as   commercial costs (shipping, packaging, and duties, insurance), marketing costs over and above the product cost.The marketing expenses such as cost of catalog, samples and visits to the destination country can add up to a significant chunk.

Some of the common costs that are incurred by the exporters include transport cost from factory to port of departure, import duty and taxes, custom clearance, ground transportation from port to customer’s warehouse and marketing agent’s commission.

As such the exporter needs to factor in both fixed and variable before quoting the price and also estimate the minimum volumes they need to sell to recover their costs.

Secure The Order And Finalise Trade Terms

Once the buyer is interested in your product, the next steps would be to finalise the trade terms also known as Incoterms. These typically define the responsibilities of buyers and sellers and costs and risks undertaken by each party.  Some of the commonly used terms include EXW (pricing is ex-factory and buyer is responsible for the transport/insurance), FOB (Free on Board, pricing includes cost of transport till the port of origin) and CIF (Cost insurance and freight, the pricing includes the freight costs and insurance required for transporting the goods to destination).

How Can We Help?

If you are interested in exporting your plastics products, we can assist you in the following

  • Identifying potential markets for your products
  • Viability study for entering a particular market
  • Assistance in generating a list of potential buyers and in scheduling meetings

[1] Based on discussions with NSF International’s office in India

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