The Hindu Business Line : The opportunity in green

A host of corporates are getting into agri-business as it will ease their foray into food retail. The priority accorded to the food-processing sector in the Union Budget this year will also fuel the interest.

A PROCESSING UNIT IN KOCHI: Many corporates are eyeing the food processing sector, which is slated for big growth.

The Indian farmer seems to be fast developing corporate linkages, what with India Inc discovering that there is big money to be made in growing and selling fruits and vegetables.

Companies which have drawn up big plans in the agri-foods segment are Reliance, Pantaloon, Godrej, Field Fresh (Bharti Enterprises CMD Sunil Mittal's joint venture with Rothschild), Ballarpur Industries, DSCL, Tata Group and Mahindra & Mahindra.

Overseas demand

Market analysts are already terming this opportunity in agriculture as the next big growth driver, with demand coming not only from the domestic market but also from overseas.

In fact, the opportunity for growth is immense with less than 1.5 per cent of the food undergoing processing in the country.

This is minuscule compared to Thailand, Malaysia and Brazil where it is as much as 65-75 per cent.

The segment, with immense potential, is projected to grow at a high double-digit rate. A study conducted by McKinsey and the Confederation of Indian Industry (CII) pegs the turnover of the total food market at approximately 2.5 lakh crore.

Meanwhile, the move to agriculture makes sense for companies which are all set to jump on to the food retailing bandwagon.

"Retailing in general and food retailing in particular is one of the high-growth sectors. Food retailing is to grow 10-fold in five years. For a lot of Indian companies, this may pose a good business opportunity.

There are also few companies where food farming/ retailing might appeal in sense of backward or forward integration (Godrej Group, for instance)," points out Amit Adarkar, Director at market research company Synovate.

Analysts add that for corporates planning a foray into food retail, getting directly involved with agri-business helps to keep costs under check by eliminating the role of intermediaries.

Reliance Industries, for instance, is charting out a massive foray into the retailing sector and is reported to have plans to invest over Rs 4,000 crore, mostly in Punjab and Haryana, for its foray into agri-business. The company is believed to have tied up more than 900 acres of land in Punjab already.

In fact, both Reliance and retailing giant Pantaloon are learnt to be in the process of partnering with farmers to source food grains, fresh vegetables, fruits and processed foods directly.

Similarly, Bharti, which is in talks with several foreign retailers, including Tesco, to foray into food retailing, can derive synergies from its subsidiary Field Fresh Foods, a 50:50 joint venture with the Rothschild Group.

Field Fresh, which started off with an investment of Rs 250 crore, could become the supply line for Bharti's proposed retailing business.

The company has been working with farmers in Punjab, Jammu & Kashmir, Himachal Pradesh and Uttaranchal to source apples, kinnos, litchis, cherries and tomatoes among other products. This portfolio may soon increase to include grapes, mangoes and bananas.

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