Business Opportunity – Compostable Plastic Bags

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

How can we help?

We can help you start a compostable plastic bags manufacturing unit through a number of services including viability assessment, market landscaping and technical consultation

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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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Change in MSME definition: Does it help the sector?

The union cabinet recently approved a change in the definition (see Table 1) of Micro, Small and Medium enterprises (MSME), to base it on their turnover as against investment in fixed assets. The Micro, Small and Medium Enterprises Development Act, 2006 will be amended accordingly to reflect the new definition. A change in definition of MSME assumes significance as it is used to provide a number of incentives such as capital, interest and technology/market promotion subsidy by the central and state governments.

Table 1: MSME definition
EnterpriseEarlier definitionNew definition
MicroManufacturing enterprises: Investment in plant and machinery< INR 25 lakhs
Service enterprises: Investment in equipment/machinery<INR 10 lakh
Annual Turnover< INR 5 crore
SmallManufacturing enterprises:Investment in plant and machinery between INR 25 lakhs and INR 5 crore
Service enterprises:Investment in equipment between INR10 lakhs and INR 2 crore
Annual turnover between INR 5 crore and INR75 crore
MediumManufacturing enterprise: investment in plant and machinery between INR 5 crores and 10 crore
Service enterprises: investment in equipment between INR  2 crores and 5 crores
Annual Turnover between INR 75 croreand 250 crore
Note: Turnover of enterprises is likely to be calculated based on GST returns

The new classification may result in many medium enterprises being classified as small enterprises (or small getting classified as micro) based on their turnover. Such reclassification would be positive for enterprises in sectors such as engineering, machine fabrication, apparel, construction contractors etc, where a large number of MSMEs are vendors to public sector enterprises (PSUs). These PSUs reserve 20 per cent of their procurement requirements for micro and small enterprises.

Further, a turnover based definition coupled with incentives for filing GST will encourage MSMEs to file taxes and transact through bank accounts, resulting in improved information availability on the sector for the policy makers. The GST filings of 2017-18, already show an increase of almost 50 per cent in the number of unique indirect tax payers.

The most significant impact though would be on state governments who would now have to revise their industrial policies that currently offer incentives to new enterprises based on their investment in plant and machinery. These policies could broadly be divided into two categories:

  • Capital investment subsidies (subsidies on machinery, building); and
  • Interest related subsidies where loans given to micro and small enterprises attract lower interest rates.

For example Government of Telangana offers Interest subsidy under Pavala vaddi on the term loan taken for fixed asset by new micro and small enterprises. The amount of loan is currently governed by the investment guidelines as defined by the MSME Development Act, 2006. This scheme may have to beredesigned to reflect the new MSME definition. Similarly, central government schemes such as PMEGP (Prime Minister Employment Generation Programme) that provide subsidy to micro and small enterprises will also have to be revised accordingly.

As such, the change to a more transparent mechanism based on turnover is a welcome step as it would make it easier for MSMEs to grow and transition from micro to small and medium enterprises. Further, unlike earlier definition which incentivised enterprises to remain small (as the incentive decreased with the increase in fixed assets), the new definition would likelystimulate investment in the sector.

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BUSINESS OPPORTUNITY – TABLE SAUCES

Table sauce is a common condiment for a number of products such as bakery, Chinese food and fast food. It is typically used to add flavour or texture while cooking or dipping. Broadly, there are four categories of sauces

  • Tomato Ketchup & Sauce
  • Chinese Sauces
  • Pizza, Pasta & Barbeque Sauces
  • Mayonnaise and other bread spreads

Industry

The table sauce category in India, estimated to over INR 1000 crores is growing at over 20 per cent per annum[1]. Tomato sauce accounts for over 65% of the table sauce consumption, other categories (such as Chinese sauces, Mayonnaise), while relatively smaller in size are also growing rapidly.

Innovation in variants and packaging is the key driver for the growth of this industry. For example Nestle has introduced a number of variants of its tomato sauce (no onion tomato sauce, hot and sweet tomato sauce, masala sauce, tamarind sauce) over the years. The company has also launched pichkoo, where the sauce is packaged in flexible packaging material, thus allowing it to be squeezed easily. Similarly, Dr. Oteker, India (manufacturer of Fun food brand of products) offers a large variety of products including mayonnaises, sauces, spreads, salad dressings, cakes, dessert toppings. For its mayonnaise range alone, the company sells 8 flavours.

Sauce manufacturers have two business models: Business to Business (B to B) and Business to Consumer (B to C). Small and medium enterprises typically start with supplying to businesses and then go retail. For example, Fun foods has been associated with subway in developing customized variants of sauces. Veeba foods, a recent entrant in the market which supplies sauces and dips to restaurants and fast-food chains, recently raised $6 million and forayed in retail segment through its own VEEBA brand[2].

[1] http://www.hindustantimes.com/business/catch-up-with-ketchup/story-aGK6GS2v14sgCWbQEb3t7O.html.

[2] http://www.livemint.com/Companies/caIm09B3bTK9bLkVuhppKI/Veeba-Food-raises-6-million-from-Verlinvest-otheINRhtml.

Why is table sauce manufacturing an attractive opportunity?

Increasing customer appreciation for western cuisine has resulted in a growth of sauces, dressings and condiments industry. International cuisines such as Italian, Mexican and Thai are gaining popularity which in turn act as demand drivers for specialised sauces and dressings.  Given the market growth, many multinational fast food chains (Wendy’s, Taco bells) have entered India in the past five years.  India is the second largest market for Domino’s Pizza after the US.

Besides consuming the sauces as part of eating out, consumers are also purchasing these sauces to use them for food preparation. The cooking sauce (soya sauce, pasta sauce) category makes up around 33 per cent of the sauce market. Supermarkets and convenience stores have become popular channels for purchase of such products.

Where is the table sauce manufacturers located?

The industry can be categorised into two types of players: large FMCG multinational companies such as HLL, Nestle that dominate tomato ketchup market and other players (see Table 1) such as Dr. Oetker, Delmonte specialising in specific category of sauces. Most of the manufacturing units are located in Maharashtra, Haryana and New Delhi.

Down south, post bifurcation, both Andhra Pradesh and Telangana have been focussing on developing food processing sector by offering financial incentives to the 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 table sauce manufacturing units, thus making it an attractive opportunity to set up a sauce manufacturing unit here.

Table 1: Manufacturers of Table Sauces (other than ketchup)
S. No.Company NameBrand and Product RangeRemarks
1Field Fresh foods Pvt Ltd, Gurgaon, HaryanaDelmonte:Pasta Sauces, mayonnaise & Ketch upA joint venture between Bharti enterprises (Telecom major) and Philippines-based Del Monte Pacific Limited, turnover over INR 500 crores
2Capital Foods Limited, Mumbai, Maharashtra.Ching’s Secret & Smith & jones: Soups, pastes & saucesManufactures Chinese sauces, revenue of around INR 500 crores[1]
3Dr. Oetker India Pvt Ltd, New DelhiFun foods: Mayonnaise, Italian sauces, sandwich spreads, Chinese sauces, salad dressingsA German company that acquired Fun Foods, an Indian manufacturer of table sauces in 2008, current revenue of over INR 150 crores [2]
4Cremica Food Industries Pvt. Ltd, Ludhiana, PunjabCremica: Ketchup, Pizza & pasta sauce, salad dressingsStarted as a homebased enterprise, current turn over more than INR 200 crores[3].
Source: FineTrain Research

[1]https://timesofindia.indiatimes.com/business/india-business/capital-foods-targets-rs-500-cr-revenue-this-fiscal/articleshow/57250985.cms

[2]https://brandequity.economictimes.indiatimes.com/news/business-of-brands/dr-oetker-eyes-rs-1000-crore-sales-by-2020/55659035

[3]http://www.livemint.com/Companies/Hac0C64hqGcuBbGmzuU40N/Cremica-Food-Industries-raises-15-million.html

Manufacturing process and capital requirements

Sauces can be prepared from varied range of items such as eggs, vegetables, fruits, beans, milk etc. as shown in Figure1.

Figure 1: Sauce Manufacturing Process

In addition to the processing machinery discussed above, the manufacring facility needs to have infrastructure including cold storage, waste water treatment facilities and a strong R&D team. The budget required for an entry level capacity of around 1 tonne per day would be over INR 2 crore.

Key Success factors

Critical success factors for this business include:

  • Nimbleness in identifying variants
  • Good relationships with exiting suppliers and customers
  • Building up a niche segment
  • A strong R&D team that can develop new products
  • Adequate financing to meet large working capital needs

How we can help you

If you are interested in setting up a table sauce 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

Call us/reach us

Call us: 800 888 4932

Write to us: bchhatre@finetrain.comadmin@finetrain.com

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ECONOMICS OF DAIRY FARMING

India is world’s largest producer of milk, with a production of around 155 million tonnes per annum, contributing to 20 per cent of the world’s milk output. The dairy sector is one of the fastest growing sectors in India, growing at a CAGR of over 15-20 percent, largely driven by the growth of value added products such as yogurt, cheese, ice-cream etc.

The demand growth in dairy industry has also spurred an interest in dairy farming by entrepreneurs from rural as well as urban India. This blog discusses factors that influence profitability and sustainability of a dairy farm.  These include macro factors such as international and domestic prices of milk, and farm level factors such as size of the dairy farm,its cattle management practices and its marketing strategies.

How are local milk prices linked to international milk prices?

While milk is a perishable commodity mostly sold locally, Skimmed Milk Powder (SMP) is traded in the global market and international prices of SMP influence India’s SMP exports. SMP is a large end user of milk, asalmost 11 tonnes of milk is needed to make 1 tonne of milk powder.  Since SMP has a long shelf life as compared to milk, dairy companies keep their surplus milk stock as SMP, and also use it to manufacture milk based products such as ice-cream and yogurt. Adecline in international prices of SMP reduces the export of SMP from India and therefore increases domestic milk availability. Increased domestic availability can sometimes impact the prices at which dairies procure milk from farmers.

For example, India’s SMP exports declined to 15,930 tonnes (INR 293.01 crore) in 2015-16 from a peak of 1.3 lakh tonnes (valued at INR 2,717.56 crore) in 2013-14 due to a steep decline in global SMP prices. During the same time, milk procurement prices declined by as much as INR 10 per litre in North India and Maharashtra.

As can be seen from Figure 1, the prices of SMP tend to fluctuate, which can lead to volatility in the domestic milk prices as well.

Source: https://www.globaldairytrade.info/en/product-results/skim-milk-powder/

Why is marketing strategy for milk so crucial to the profitability of my milk farm?

Dairy farmerstypically sell their milk to a number of customers including public and private sector dairies milk traders, milk processors and directly to consumers. Dairies are the largest bulk buyers accounting for over 20 per cent of milk procurement. They currentlyprocure the milk at around INR 25-35 per litre across the country and the product is sold at a retail price of INR 35-45 per litre.  However, the retail prices for branded, farm fresh milk are higherINR 60-70 per litre.Over the past decade, there has been a spurt in dairy farms that sell their milk as farm fresh milk, desi cow milk, chemical free milk or A2 milk etc. directly to the customers. Some of these players are shown in Table 1

Table 1: Dairy farms selling branded fresh milk
Company nameProductValue proposition
Vrindavan Milk, BangalorePure Natural cow milk, Desi A2 milkDelivered directly from farm, no chemicals used to inject cows.
Klimom, HyderabadCow milk, A2 milkDelivered in eco-friendly glass bottles within a few hours of milking
Astra Dairy, ChennaiCow milk and dairy productsFrom farm to your home in 12 hours
Pride of cows, Pune (aventure of Parag Milk Products)Pasteurized cow milkFarm to home fresh milk, completely untouched by human hands

As a dairy farmer, you have many choices; you can choose to find an assured market  in a large dairy or milk processing companies, sell  fresh milk under your brand name or sell value added products such as flavoured milk, yogurt etc.Therefore, market related choices should be made first and then you can work backwards to make decisions related to animals, location, investment and farm automation.

What are other profitability drivers?

The success of a dairy farm is aligned with the productivity of its animals and the following elements play an important role in determining a farms profitability:

  1. Milk yield: Milk production over the productive life of the dairy animals is one of the most important drivers of the profitability of a dairy farm. It depends on many factors such as animal’s age at first calving, number of lactations and yield per lactation. Further, milk production can be enhanced by providing adequate amount of green fodder and keeping animals disease free.
  2. Self-sufficiency in Fodder:The cost of feed accounts for majority (about 70%) of the costof running a dairy farm. The fodder can broadly be divided into three parts: Green fodder, Dry Fodder and Concentrated Feed. Of the three, Green fodder, which is needed in large quantities, remains most scarce, due to gradual reduction in the green cover of our landscapes. Further, the fodder prices can be volatile and do not move in line with the milk prices. Therefore, in order to be sustainable, a dairy farm must be self-sufficient to meet its green fodder needs. The fodder requirements for a farm with 20 cows are illustrated in Figure 2.

 

Figure 2: Fodder Requirements of a dairy farm

Since fodder cultivation requires a lot of space, several dairy farmers have now shifted to silage, which refers to green fodder preserved under anaerobic conditions. Silage provides benefits similar to that of fodder but is needed in lesser quantities.  Feeding your animal silage, lowers the area needed for fodder cultivation and frees up the land, which can be used to generate income through cultivation of grain/horticulture crops.

  1. Best practices in animal management: Good farm management practices that improve animal productivity are shown.
Figure 3: Best Dairy management practices

How much investment is required for a dairy farm?

A dairy farm requires investment towards land, construction of shed, milking equipment and purchase of animals.Land and animals are the two largest investment heads.

  • Land: The land is needed for the cattle shed and milking operations and also for growing fodder. Minimum 2-3 acres of land would be required for a 20 animal farm.
  • Animal: The cost of animal depends on its age, milk yield, breed etc. As per NABARD’s dairy entrepreneurship development scheme (DEDS), the cost of 10 animals of desi cows is INR 6 lakh.
  • Civil construction: Shed for animals to provide them protection from heat/rain etc. and storage room for feed and housing for labour if needed
  • Equipment:Milking machines, chaff cutter, tipper for cutting the crop.

As such, the investment in animals should be about INR 12 lakhs for a 20 cow dairy farm. Assuming that investment in animals is about 50% of the cost of the farm (excluding land), the investment in the dairy farm with 20 animals should be about INR 25 lakh.

Why is dairy farming an attractive opportunity?

The Indian dairy market is expected to continue  grow at a rate of over 15%, over the next five years, mostlydue to a growth in the consumption of value added products such as cheese, curd, flavoured milk etc. Anticipating the growth, Indian dairy companies have planned significant investments in capacity expansion as given below in table 2.

Table 2: Capacity expansion plans of Indian Dairy majors
CompanyCapital expenditure plansBrandBudget(INR crore)
Heritage Foods Ltd.Addition in the existing capacities in curd and whey products segmentHeritage70 – 75(for FY18)
Gujarat Cooperative Milk Marketing Federation Ltd (GCMMFL)Additional capacities in cheese and chocolatesAmul3000(Upto 2020)
Kwality Ltd.Additional capacities in value-added product categories like Cheese, Paneer, UHT Milk, Flavoured Milk and Table ButterDairy Best520(forFY18 and up to mid FY19)
Parag Milk Foods Ltd.Expansion and modernization of existing plants and improvement in marketing and distribution infrastructureGo, Gowardhan, Topp Up64.5(for FY18)
Prabhat Dairy Ltd.Upgradation of plant and machineryPrabhat40
Source: Indian Dairy Industry – driven by value added products, a report by CARE Ratings

Also, there have been a number of acquisitions in the dairy sector by large private equity companies, and multinationals   who are acquiring local dairy companies to strengthen their operations in India.

Table 3:Acquisitions in the dairy sector
Acquired CompanyInvesting CompanyYear
Kwality LimitedKKR India(a private equity firm)2016
Tirumala MilkLactalis , a France based multinational dairy corporation2014
Anik IndustriesLactalis2016
Creamline DairyGodrej Agrovet Limited2015
Dairy business of Reliance RetailHeritage foods2017
Source:Indian Dairy Industry – driven by value added products, a report by CARE Ratings and FineTrain research

In order to meet the demand growth of the dairy industry, a strong and sustainable dairy farming sector needs to be developed. Dairy farming is currently dominated by a small farmer who has two animals and uses dairy income to supplement his/her agriculture income.  Given the bright prospects of dairy sector and lack of professionally run dairy farms, there is an opportunity for entrepreneurs who can set up dairy farms with scientific feed management practices. These farms can also forward integrate into manufacturing of milk based products.

How can we help?

We can help you set up a dairy farm or a milk product business through a number of services including:

  • Market feasibility assessment
  • Development of project proposal for loans/credits
  • Technical consultation
  • Project execution support

Call us/reach us

Call us: 800 888 4932

Write to us: bchhatre@finetrain.comadmin@finetrain.com

Visit us: www.finetrain.com

[1] Source: India’s milk production in 2015-16,

[2] Source: Indian Dairy Industry-driven by value added products-by Care Ratings, June 30, 2017

[3] Source: http://indianexpress.com/article/india/india-news- india/global-dairy- price-recovery- to-benefit- indian-
farmers-3019391/

[4] Source: http://indianexpress.com/article/india/india-news- india/why-milk- prices-have- fallen-by- rs-10litre- for-
farmers/

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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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Plastic Pipes– Business Opportunity

Indian plastic pipes industry size is estimated at around 2.5 million tonnes per annum. There are around 600 manufacturers of pipes, with the top 20 players accounting for 60 per cent of the market, and small players for the remaining 40 per cent[1].

While large manufacturers make the pipes needed for all domestic, agricultural and industrial applications (such as casing pipes, bore well column pipes, electrical & telecom ducts, agricultural pipes), smaller one’s manufacture pipes needed for last mile connectivity. These include plumbing systems, irrigation systems, electrical conduits and conduit fittings, mostly made of HDPE, LLDPE and PPR as explained in the table below.

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The Government spend on agriculture sector and irrigation schemes continues to be the main driver of pipes. For instance, Mission Bhagiratha, Telangana government’s initiative to provide piped water supply to every household in the state has given impetus to the pipe industry here. Apart from the main trunk pipelines for about a length of 5,000 km, the mission requires secondary pipelines, stretching over 50,000 km. These secondary pipelines will carry water to tanks in villages from where a village-level pipeline network extending 75,000 km will supply water to households in the state. The village level pipelines specifically require HDPE pipes[2].

Market:

In value terms, the Indian plastic pipes market stands at INR 22,000 Crores[3] and is forecast to grow at a CAGR of 10%. The market is dominated by PVC pipes that account for more than 70% (see figure 1)

Figure 1: The figure below depicts the polymer share of plastic pipes and fittings industry

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Apart from national level players such as Astral Poly Technik Limited, Supreme group of companies, Finolex industries, there are a large number of local companies, as shown in the Table 2. The local companies have strong dealer network in their region.

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Process &Technology:

Manufacturing process can broadly be divided into: mixing, extrusion, pipe sizing and down streaming. The extrusion line is customised to users’ needs, and the most important parameter is pipes’ diameter and wall thickness. 

  1. Formulation & mixing: This is required for PVC but not for any of the above-mentioned material.
  2. Extrusion: Single screw (compulsory for HDPE and LLDPE) and Twin-screw extrusion (TSE). According to the experts, if quality is imperative, one must use TSE, as it can work even without the impact modifiers and flow promoters.
  3. Pipe sizing: This can be in two ways; a) Pressure sizing, which is suitable for higher diameter pipes and b) Vacuum sizing, which is suitable for lower diameter pipes.
  4. Down streaming: This includes a number of functions such as cooling the pipes, cutting the pipes, Socketing and printing. 

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Budget:

The entry level plant (One extrusion line for manufacturing pipes for construction and irrigation industry of capacity about 100 Kg per hour) can be set up in INR 3 Crores including land, building, and working capital. Requirements for working capital would be large due to large raw material inventory and dealer credit.

Table 3 gives typical cost of machinery, which may change according to the specifications such as wall thickness and diameter of the pipes.

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How Can We Help You?

If you are interested in setting up a pipe extrusion unit, we can assist you. Our services include

  1. Market & Financial viability assessment
  2. Technical consultancy
  3. Detailed project report preparation
  4. Support in project execution 

Reach Us

Call us @ 800 888 4932

Write to us- bchhatre@finetrain.com

Visit us- www.finetrain.com

[1] Source: Finolex’s MD, Saurabh Dhanorkar interview with DNA – May, 2016

[2]Source; Livemint news article – August, 2016.

[3]Source: HDFC securities – initiative coverage –  May, 2017

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Business Opportunity: Pre-Stressed Concrete Sleepers

PSC sleeper refers to steel reinforced concrete sleeper, commonly used on railway tracks. Besides Indian Railways, power plants, refineries and cement plants also use sleepers for their rail tracks. Demand driver

Indian Railways has a network of over 65,000 kilometers encompassing length and breadth of the country.  The growing population and increasing economic activity has resulted in over-utilization of its existing network.  So much so that the trunk routes of the railways comprising merely 16% of the network carry about 50 percent of the work load. The Indian railways has been routinely upgrading its network (see Table 1), however the capacity upgradation has been far below the actual requirements and the network continues to remain congested.

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The pace of railway infrastructure upgradation has picked up over the past one year, driven by the government’s initiatives to improve quality and safety of Indian railways. The Railways has committed to building 7 kms of infrastructure per day in 2016-17, which will increase to 13 Kms per day in 2017-18 and 19 kms per day in 2018-19.  Railways have identified following priority projects (See table 2) to be taken up in the medium term.

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In addition to these, Indian Railways has also proposed to create a high speed corridor network of around 10,000 kilometers. In light of the above mentioned plans, the railways are likely to develop at least 5000-8000 kilometers of rail network per year, almost 30-40% more than in the past. Assuming that per kilomer of rail would need 1600 sleepers, these plans are likely to result in an annual demand of about 1.3 crore of sleepers.

Key suppliers

The sleeper industry is dominated by a few players who are present across the country. The current capacity of the industry is around 1 crore sleepers per annum. More details on the players are provided below.

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Given the expected increase in demand by 30% to 40%, there seems to be enough room for new capacities to come up. However, one needs to analyze the regional demand and supply balance carefully.

Govt approvals and Budget

Setting up a railway sleeper unit would require approvals from Railway RDSO (Research Design and Standards Organization) as well as the Zonal Railway office.

The process of manufacturing the PSC entails strengthening of concrete, casting it into pre-defined mould and curing it. There are two popular technologies: Long line and Short bench manufacturing, with short bench manufacturing being more popular in India.

The budget requirements for a capacity of 3-4 lakh sleepers per annum could be upwards of Rs. 15 crore. Further, one needs to consider the cost of the land, the sleeper plant would need to be located in the vicinity of a railway station for the ease of transport of sleepers.

How can we Help You?

We can help you assess techno economic feasibility of a sleeper manufacturing plant including the market assessment, regulatory compliance framework, capital requirements, machinery evaluation and profitability and return on investment.

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Business Opportunity: Organic Fertilizers

Organic fertilizer is a mixture of decayed organic matter. It is usually made by gathering plant material such as leaves, grass clippings, and vegetable peels and animal waste into a pile or bin and letting it decompose with the help of earthworms, fungi or bacteria. Organic compost contains essential macro and micro nutrients for plants, often absent in synthetic fertilizers. Compost releases nutrients slowly over the cultivation period, which helps plants soak those nutrients better and make a healthy food in our plates.

The demand for organic fertilizers is rising in India as well as internationally due to increasing awareness of organic farming and sustainable agricultural practices. The market size for organic fertilizers in India stands at 2547 lakh metric tonnes as of FY 2015-16.[1]

The major consumers of organic fertilizers are horticulture farmers, farmers of export oriented crops, farmers of crops such as ginger and turmeric and urban households that use compost for their home gardens.

What are different types of organic Fertilizers?

As per the Fertiliser Control order, 1985, the organic fertilisers can be divided into three categories:

Vermin compost: Most popular form of organic fertiliser, made by decomposing the organic material with the help of Vermi, FCO has specified guideline in terms of nutrient percentage, moisture levels etc

City compost: The compost made from city waste, including household waste, municipal waste etc.

Organic manure: Compost made from animal and plant waste (including the vermi and city compost). Manure typically has higher organic content vis a vis other organic fertilisers.

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What is the market?

The market has two segments:

Horticulture farmers: Farmers growing fruits and vegetable crops use compost to reduce chemicals residue from their crops. Further, these crops are relatively more profitable vis a vis traditional field crops such as paddy, cotton and hence can afford to purchase organic compost. This segment is dominated by large fertiliser companies who have the dealer network and sales force required to reach the farmers. Below are the large players in Andhra Pradesh and Telangana.

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Nurseries: This segment has a lot of small and medium enterprises. Here the product packaging is important. Some of the players in this segment also sell only through online network.

How to get started with manufacturing of organic compost?

One needs to have a detailed understanding of the processes involved in manufacturing, marketing and selling the compost.

It’s not a very capital intensive business and hence capital requirements are not very large. One does not need many plants and equipment’s except for pits /wilgrows to dump the waste, shredder and a palletising machine. The main cost of establishing will be land and labour. A unit of capacity to process 20-30 tonnes of waste per day can be set up within a budget of INR 50 Lakhs.

The compost is also made as a by-product of a biogas plant. The biogas plant converts the organic waste into bio gas through anaerobic digestion and produces a slurry, which can be dried and used as compost.

Government incentives

There are a number of incentives available to manufacturers and farmers. It can broadly be categorized as incentives for farmers and incentives for entrepreneurs as given below.

Farmers are offered organic fertilizers at a subsidized cost

Entrepreneurs are offered incentives to set up compost manufacturing facility. For example, under National Program for organic farming, manufacturers of compost from vegetable waste are offered a subsidy of 33% of the cost of project.

Challenges
  • The market is still in its formative stage and awareness of the benefits of organic compost has just begun to spread across farmers and farmer groups.
  • Reliable Data on organic input market is not present.
  • Organic system of farming is far more expensive than doing farming using chemical fertilisers
  • The economics depend on the waste procurement cost, so those have to be tightly controlled

How can we help?

We can help you set up a compost manufacturing unit through a number of services including

  • Market viability assessment
  • Technical consultation and
  • Project execution support.

[1] Source: National Centre for Organic Farming

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Business Opportunity: Injection Moulded Products

The injection moulding technology is used for mass production of plastic products. Plastic material, in the form of granules, is melted and injected under pressure to fill a mould to create different types of rigid shapes.

Injection moulding is a popular way of manufacturing both industrial as well as household products. The most common examples of injection moulded products include PET bottle caps, plastic containers, parts of washing machine, cooler and agricultural pipe fittings.

The table below enlists a number of products that can be made through injection moulding.

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Markets

The PET preforms and bottles/container segment is more crowded as compared to industrial/agri components. The quality specifications of industrial components are more stringent vis-a-vis household segment and therefore require more investment in machinery and experience in plastic technology.

The players in the injection moulding market can be divided into the following categories –
  1. Manufacturers who also market their products: For example, Plast-O-Pack India, Mumbai manufactures and markets various designer house hold products such as microwave containers, pencil boxes, fridge bottles, containers and corporate gift items.  Bangaru Irrigation systems, Telangana manufactures and markets the sprinklers and drips and other irrigation system components.
  2. Contract manufacturers: These players manufacture goods or rigid packaging material for others. In contract manufacturing, there are two models: A) complete job work price model, and B) conversion only price model.

Under the conversion price model, the clients provide the raw material (resins/pellets) and they are billed only for conversions of resins to products, thus protecting injection/blow moulding companies from price fluctuations of the raw material. The clients in such cases usually demand stringent quality standards. However, this consumer segment is difficult to enter for a new injection moulding company as the clients specifically look for imported machinery, in house testing facility and large operational capacity.

Some of the Hyderabad based contract manufacturers include Baba Group of companies (clientele includes Asian paints, Berger paints).  Innocorp Ltd. (clientele includes furniture brands such as Neelkamal and Polyset). Nano polymers (clientele includes Neelkamal, Wipro, HBL, Acme, Asian paints).

PROCESS & TECHNOLOGY

Figure 1: Process flowchart

injection molding process
Injection machine is the heart of the whole process, as it is responsible for turning resins into melted free-flowing liquid and injecting the same into mould cavities.  The capacity of the machine is measured in terms of the pressure it exerts to inject the melted material into the mould and it is measured in either Tonnes or KiloNewton. The capacity of the machine may also be referred to as “shot weight”. Basically, Shot weight/ Injection rate of any machine is the grams of the melted raw material injected to the mould at one shot of pressure. The popular injection moulding machinery suppliers in India include Windsor Machines Ltd., Ferromatik Milacron India Pvt. Ltd., Haitian Huayuan Machinery (India) Pvt Ltd, etc.

Moulds are the most critical part of the process, apart from the injection machine. Mould designs are critical for the shape and texture of the output and also for ascertaining the required injection rate and consequently the capacity of the machine.  Mould designs are typically mentioned in terms of cavities. As such, higher the cavity, higher the production speeds.

BUDGET

While   minimum budget to start an injection moulding unit would be more than Rs 3 Crores, including land, building, and working capital, the overall cost of plant would depend on the quality standards and complexity of the final product. The cost of an injection moulding unit has four components: injection moulding machine, blow moulding machine, auxiliary equipment and working capital. Moulds are the costliest part of the plant, more so because for each different shape, a different mould will be required and the moulds are priced based on the number and complexity in design of the cavities.

The table below depicts a sample plant cost for making containers, the process involves injection moulding as well as blow moulding.

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How Can We Help You?

If you are interested in setting up an injection moulding unit, we can assist you in starting one. Our services include

  1. Market & Financial viability assessment
  2. Technical consultancy
  3. Detailed project report preparation
  4. Support in project execution

Reach Us

Call us @ 800 888 4932,

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Visit us- www.finetrain.com

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