Business opportunity : Natural gums and Resins

Introduction

Natural gums are plant products, formed by the disintegration of plant cellulose. These are typically extracted from seeds of plants like Guar, Tamarind, Cassia tora, etc. These are polysaccharides that increase the viscosity of solutions even when added in very small quantities. Natural gums are preferred over synthetic gums in food applications.

The natural resins, gums, gum-resins (NRG) and balsam’s global market are estimated to be about 1358.44 million USD. India is the second largest supplier of natural resins & gums in international market, with a share of 16.8%, next to France, which has a market share of 26%[1]. In India, the Guar gum has a lion’s share in total NRG production as well as in exports. Therefore, the focus of this blog is on guar gum.

Guar gum-Industry at a Glance

India enjoys monopoly in the Guar gum industry with a market share of over 80%, as it has the most suitable climate for Guar gum cultivation. The Guar industry is driven by the export market, as more than 70% of domestic production is exported. The major export destinations are USA, China, Canada, Germany & Russia. Rajasthan is the largest guar producing state followed by Gujarat, Haryana and Punjab. Rajasthan alone accounts for 70% of the total production in India.

Guar Seed Cross – section and Process flow

The guar seed has 3 parts – Germ (40-45% of the weight), Endosperm (38-45%) and Husk (14-16%), as shown in figure – 1. The gum powder is produced from endosperm in a two stage process. In the first stage, the guar splits are produced and the by-product is Guar Meal (67%) (Korma – 37% & Churi – 30%). The splits are then pulverized into gum powder, and the powder is further processed into various derivatives.

Figure 1: Guar gum seed break up

Derivatives of Guar Gum & Industry specific application

Guar gum has wide range of applications in Food Industry, Textiles, Oil well drilling, Cosmetics & Pharmaceuticals, Paper, Mining, Construction and Explosives. The derivatives of guar gum powder are grouped into Non-ionic, Anionic and Cationic.

Figure 2: Derivatives of Guar gum

The applications in various industries are listed in Table1.

Table 1: Applications of Guar Gum
IndustryUses
FoodThickening, gelling, emulsifying agent and stabilizer
TextileSizing & Finishing agent
Oil well drillingFluid loss controlling agent, additives in fracturing fluids. Fast Hydration Grade is used
Pharmaceuticalstablet binders, disintegrants, emulsifier, suspending agent, gelling agent, stabilizing agent, thickening agent, film forming agent, sustaining agent and coating agent
CosmeticsConditioner and viscosifier, thickener in toothpastes & shampoos
PaperTo get better finish, improved sheet formation, increased bursting & fold strength and denser surface for printing

Demand & Supply

Guar consumption was been around 22.7 lakh tonnes in the year 2016-17. The consumption is volatile and varies depending on the export market, which accounts for more than 70% of the domestic production. The graph depicts the trends in consumption of guar seed in the past decade.

Chart 1: Consumption of Guar seed in export and domestic markets from India

Globally, oil and gas industry is the biggest user and domestically food industry is the largest consumer of Guar gum. (See chart 2&3). The sector wise demand of guar gum powder in international & domestic market is shown below in Chart 2 & 3.

Chart 2 & 3: % application across industries in Domestic & International markets

On the supply side, there are more than 600 guar processing units in India with an installed capacity of around 10 lakh tonnes. The present capacity utilization of the industry is less than 50%, due to weak demand from the export markets. However, the demand is expected to increase due to increasing oil prices, which result in higher capital expenditure on oil exploration related activities.

Price Volatility of Guar Gum

The prices of guar gum powder is highly volatile (see chart 4) and are a function of factors such as crop cultivation, shale oil and gas exploration, availability and price of substitutes, etc. The users shift to the substitutes based on price competitiveness. But guar gum has its own advantages, for example: Guar gum is soluble in both hot and cold water as against Tamarind Kernel Powder (TKP), which is soluble only in hot water. The various substitutes to guar gum are discussed in Table 2,

Table 2: Substitutes to Guar gum
IndustryUses
TextileCMS (Carboxy Methyl Starch), CMTKP (Carboxy Methyl Tamarind Kernel Powder) and Sodium Alginate
PaperTKP, Potato Starch, etc
FoodXanthan Gum, Agar , CMC (Carboxy Methyl Cellouse)
CosmeticsTKP
Shale Oil& Gas ExplorationSynthetic Polymers

Chart No.4: Per kg [2] variation of Guar gum prices over a period of years

 

Guar Gum v/s TKP

Among natural gum, Guar gum faces competition from TKP. TKP is derived from the tamarind seed. It has excellent water absorption property and high viscosity as well. The application includes, thickening agent in sizing process of textile & printing industry and binding agent in pharmaceutical industry. The detailed comparison of Guar Gum & TKP is shown in Table No.3,

Investment

The minimum viable capacity is 6TPD (6 tonne per day) and the investment required to setup guar gum powder from Guar splits is INR 4 Cr, including the civil structure, machinery and working capital. The capital cost would increase by INR 2-3 Cr, if one is manufacturing the powder directly from the seed due to the additional investment in plant & machinery and working capital. The Breakeven period is more than 5 years.

Profitability & Governing factors

The profitability depends on the conversion margins, or the spread[3] between the guar gum and guar seed price. The spread has been volatile and has ranged between 1.4 times to 3 times over the past decade.  The profit margin can be increased by having control over the seed price, by engaging with farmers in contract farming. The profits/high returns can also be improved by making value added products for specific industry such as dairy/oil.

Why Guar Gum is an interesting opportunity?

The international demand for Guar Gum from oil and gas sector is likely to increase following higher oil prices.  The demand from food sector from both domestic and international markets is likely to remain strong.

Given the availability of idle domestic capacity, one could look at purchasing or leasing existing units, thereby reducing the initial capital investment. Instead, the investment could be made towards research and development to develop new derivatives for food and other applications.

How Can We Help?

If you are interested in starting up natural gum manufacturing unit, we can assist you in the following:

  • Identifying potential markets including domestic as well as international.
  • Detailed project report preparation – Financial analysis, Profit & Loss statements for a period of 7 years, calculation of ROI, etc.
  • Identifying existing units that are available for sale and in valuation of such units

[1]As per ICAR – Indian Institute of Natural Resins & Gums report

[2] In the year 2012-13, the price of guar gum hit all time high, this is due to the huge demand from the oil exploration companies.

[3] Spread is the ratio of guar gum to guar seed prices

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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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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

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Call us: 800 888 4932

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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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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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HOW TO SELECT RIGHT PACKAGING FOR YOUR READY TO EAT PRODUCTS

For ready to eat products, packaging plays a vital role in preserving the quality of food, extending its shelf life and making it look attractive. With the upsurge in demand for ready to eat foods, the packaging technology is continuously evolving to facilitate customer convenience, minimize processing and keeping the product as natural as possible. This blog discusses different packaging technologies and their suitability to your product as well as budget.

Packaging Technology:

The choice of packaging technology depends on the nature of food (Acidity level, moisture content), expected shelf life (few weeks, months, years) and the conditions in which it would be stored (Room temperature, frozen).  As such the packaging technology for ready to eat foods can broadly be divided into three categories.

Thermal Heating: Food is packed in pouches/containers and heated to high temperature. The thermal heating can be done through different technologies including Retort, MATS and Hot fill & pasteurization.

MAP (Modified Atmosphere Packaging):  Filled and packaged product is exposed to UV and then MAP sealed. MAP sealing refers to removing the air from the pack and replacing it with a combination of nitrogen and carbon dioxide that can extend the shelf life of the food.

ASEPTIC: The product and package/container are sterilized separately first and then product is packed and sealed in sterile conditions.

More details on the packaging technology are available in picture 1.

Picture: 1 
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Source: Printpack Packaging Supplies (India) Pvt Ltd.

Costs

The cost of packaging   has two elements; fixed cost of the equipment and cost of the packaging material (cups/pouches). The fixed cost varies significantly across technologies as can be seen below.

Pic 2: Cost of packaging Technology

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The cost of packaging material depends on the shape and weight of the packaging container. As such the cost of packaging material does not depend on the technology that is being used for packaging.

How can we help?

Are you looking to set up a ready to eat/convenience food unit, we can

  1. Help you understand the market, technology, capital and operating costs
  2. Prepare the project proposal and assist you in obtaining bank funding
  3. Technical consultation to assist you identify right machinery, packaging material providers

Reach Us

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Business Opportunity: PET Sheets

PET sheets provide a convenient way of packaging product across a number of industries – consumer products, pharmaceuticals, food & beverages, etc. PET sheets are increasingly getting popular as a preferred option for packaging of food and pharma products, due to their visual appeal, their ability to keep the product safe from moisture and easy thermoform-ability.

The table below depicts various types and forms of packaging made out of PET sheets:

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Types of PET Sheets

Various PET sheets, based on their properties, are used in different applications. For example, CPET which has a very high working heat resistance (can withstand a temperature of up to 220 degree Celsius for more than 25 minutes) is used for microwaveable containers. The table below depicts the application of various types of PET Sheets.

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Market

PET sheet market is currently small, comprising just 1.5% of PET resin consumption in India. However, this market is rapidly growing and the resin consumed by PET sheet industry has nearly doubled from 6,400 tonnes/year in FY-14 to 11,150 tonnes/ year[1] in the FY 17.

Presently most of the PET sheet is manufactured by companies that make different kinds of packaging material. Two of the Hyderabad based players include Nirmala Pet A Pack Pvt Ltd and Spear Pet Pvt Ltd.

Process &Technology

Process
The process of PET sheet making broadly involves: Raw material pre-treatment, Extrusion and Drying & Winding/ Cutting the finished sheet

Fig1: Process flow

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Sometimes, the final product requires one more layer of PET or coatings, in such cases a co extruder will be required.

Single Versus Double Screw Extrusion

Screw is the most important part of any extruder. The screw is divided into three equal zones; feeding, transition, and metering. The primary functions of the three zones are:

  • Feed – taking in the resins and feeding it forward in the screw
  • Transition – compressing and melting the resin
  • Metering/ Pumping– homogenizing/ blending the melted resins and pumping out through the extruder at a constant rate.

There are mainly two types of extruders; Single screw and Twin screw.The single screw extruders typically cost less than twin screw, however they offer less operational flexibility.

Budget

The overall budget for starting a PET sheet extrusion unit with a minimum viable capacity i.e. 300 KG/hr would be Rs. 5 Crores. The machinery cost of twin screw and single screw alone would approximately be Rs. 3 Crores and Rs. 2 Crores respectively[2].

How Can We Help You?

If you are interested in setting up a PET sheet manufacturing unit, we can assist you in starting a processing unit. 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: PRESENTATION OF RELIANCE INDUSTRIES LTD. – March1,2016

 

[2] Source: Based on discussion with extrusion machinery suppliers

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Business Opportunity in Ginger Processing

Ginger, one of the most important spice crops in India, is known for its aromatic and medicinal properties. Ginger is used as a flavouring agent in many food items.  Ginger powder and oil are extensively used in herbal medicines.

India is the largest ginger producer in the world, accounting for nearly 40 per cent of world’s production. In India, Assam is the largest cultivator, followed by Gujarat and Karnataka.  In Telangana, ginger grows in Medak district. India produces 3.85 Lakh tonnes[1] of ginger per annum and most of which is domestically consumed.

Pic 1: State wise breakup for ginger production in India 
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NOTE: Other states include Arunachal Pradesh, Meghalaya, Sikkim, Orissa, Mizoram, West Bengal, Uttaranchal, Kerala, Andhra Pradesh and Telangana.

Ginger Processing Technology

Ginger can be processed into three products; ginger powder, paste and ginger oil. The ginger oil manufacturing is typically not taken up by small businesses as it requires large capital investment towards oil distillation and oleoresin extraction plant. The ginger processing machinery is explained below.

Pic 2: Ginger processing Machinery 

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Key Players in Telangana

Ginger paste and powder: There are a number of manufacturers including national players such as Priya, Aachi, Mother’s, Smith & Jones, Hommade, and Eastern as well as local manufacturers. Some of the local brands include Capital, Red Boss, Mega Rose, Mayuri, MSR, Surya etc. These products are available in packing sizes of 50 grams to 1 kg.

Ginger oil: There are not many local players. Ginger oil manufacturers are largely based in Kerala. 

Budget

The capital requirements for ginger processing plants is discussed below.

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How Can We Help

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

Reach Us

Call us @ 800 888 4932,

Write to us- bchhatre@finetrain.com

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[1] http://agriexchange.apeda.gov.in/Market%20Profile/one/GINGER.aspx

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