Chordia Food Park's P. Chordia: Incubating foodie entrepreneurs

Till not too long ago Anita Khabia was another humble Pune housewife, renowned only amongst her friends' circle for her lip-smacking Kolhapuri Thecha, a traditional, fiery garlic chutney. Then one fine day Khabia put together a business plan, to package and sell the blistering paste, and sent it (the plan not the Thecha) to Pradeep Chordia, promoter of the 120-acre Chordia Food Park, 50 km from Pune in Maharashtra's Satara district. Khabia's company, Mona Enterprises, was soon on its way. The product, which has been on the market since early this year, is doing an average monthly turnover of Rs 6 lakh.

The 43-year-old Khabia is one of the 12 "tiny" entrepreneurs housed in the Chordia Food Park, along with two other "small" businesses. Tiny are those entrepreneurs whose investment in plant and machinery is below Rs 10 lakh, whilst small are those who've put up between Rs 10 lakh and Rs 1 crore. The excitement is palpable as Chordia whisks this correspondent from unit to unit, some fully functional, some under construction, pointing to what already exists and then moving excitedly to detail what is to come. Standing at a potato warehouse where the temperature is maintained at 4 degrees, he immediately points a few metres away to an upcoming warehouse which will have sub-zero degree storage facilities.

Chordia's model is as straightforward as it is unique: Entrepreneurs send him business plans, or alternatively he himself hand-picks budding businesspersons to execute proposals. The food park provides the infrastructure, which has been set up with an investment of Rs 16 crore, half of which came from the Chordia Group's internal resources. The entrepreneurs then sell their products to group company Chordia Foods, which markets them via its retail outlets. The plan is to have 15 such outlets in Pune shortly.

Ticking your tastebuds: Workers at a picking plant in Shirwal in Maharashtra

Along with Mona Enterprises, the other "tinies" that catch the eye if you drive through the dirt-tracks of the Chordia Food Park are Dishant Enterprises, Asha Enterprises, Rokdoba Enterprises and Sur Enterprises, each a single-room unit, with the name painted above each door, through which young owner-managers in lab coats and caps flit in and out. Sur Enterprises produces and markets synthetic syrups; Asha Enterprises, promoted by 25-year-old Milind Rane-a BTech in Food Technology from Amravati University-produces a gulab jamun mix. His neighbour Pradeep Tambe, a graduate in Chemistry and Analytical Technology from Pune's Bhartiya Vidyapeeth, has opted for custard powder and a strawberry milkshake mix. Both were supervisors at Chordia Foods until they were hand-picked for incubation at the Food Park.

Recognising the potential of the food park model, the Small Industries Development Bank of India (SIDBI) has decided to designate Pune as its first ever food cluster (as it has for several other industries) as a first step towards channelising a $120-million (Rs 528-crore) grant from a World Bank consortium. "When a number of units are clubbed together this way, we get economies of scale, lower administrative costs on loans and can also arrange for a common marketing agency since that is a big bottleneck for entrepreneurs," points out P. Rudran, Chief gm (Western Zone), SIDBI.

The Chordia Food Park in many ways is a miniaturised universe of the Rs 46,000-crore Indian food processing industry, which is growing at 10 per cent per annum (for primary processing and 15 per cent for value-added foods) and which, after it services, could well be the Next Big Thing to be exported out of India. Currently India's agri-exports account for just 1.6 per cent of $520 billion (Rs 22,88,000 crore) of global trade. "India still exports largely raw and unprocessed agri-produce and that has to change, with a move towards value-addition and branding. Also as distribution changes and larger retail formats come into the picture, as is starting to happen in India, it's a logical fit for the growth of processed foods," says Sonal Shah, Director and Head of Strategic Advisory, Rabo India. Adds Suvalaxmi Chakraborty, Head of Rural Micro Banking and Agri Business Group, ICICI Bank: "I see a future in outsourced agri-processing. For instance, companies in Tamil Nadu and Karnataka grow, process, pack and export gherkins to buyers overseas; this will be a growing trend."

Let's not forget the huge potential in the Indian market itself. "We believe we are at an inflection point on the processed foods segment. Currently just 8 per cent of all agri (food) produce is processed in India; this should touch about 15-20 per cent by 2010 and 35 per cent by 2025," adds Chakraborty. That's why megacorps like Hindustan Lever, ITC and the Godrej Group are betting big time on this segment.

And then there's Chordia Food Park, with a promoter who's driven by two die-hard convictions: One, that there's a huge potential that's waiting to be unlocked in the food processing sector. "Think what was the case with milk and milk products 30 years ago and where are we today-it's all packaged milk, cheese, butter, tetrapaks, ice creams vis-à-vis having cows in the backyard; the same thing will happen for fruits and vegetables. Besides, processed foods will always work out cheaper than fresh produce." Chordia gives the example of the recent Mumbai floods, a period during which prices of vegetables like tomatoes could have easily shot up. "They could have gone up to Rs 60 per kg; just think what tomato puree in tetrapaks could save the consumer," he points out, adding that processed fruits and vegetables account for just about 2 per cent of the total domestic consumption currently and this is expected to touch 10 per cent by 2010.

Chordia's second abiding belief is that entrepreneurship is the most effective way to ride the processed foods boom. And that faith isn't without foundation. After all Chordia's business itself has its roots in home-grown entrepreneurship. Chordia Foods was set up by Pradeep Chordia's parents who had made a modest start in 1962 when they started selling home-made spices/masalas under a company called Pravin Masale (his father was a helper in a grocery shop) and slowly built the business to include pickles, papads and ketchup (various products which go under the brand names of Pravin, Navin and Toofan). The group today clocks a turnover of close to Rs 80 crore and is now readying for its next big growth spurt with its own retail outlets.

The advantages of being surrounded by entrepreneurs are manifold. "We want to save costs by avoiding intermediaries," Chordia makes it clear. "For instance, in the case of custard power alone, we save 40 per cent of costs by cutting out intermediaries." Also, the way he sees it, food processing is a business best undertaken and understood by entrepreneurs. "There is a great deal of procurement activity involved in the food processing business and getting into each individual procurement for the company is not feasible," he explains. "Instead, the entrepreneurs are responsible for their individual products and their procurement; besides food is a very entrepreneur-driven business." The mini-promoters on the park are on the same wavelength. "This is any day better than working for a company. I can implement my own ideas and set my own targets," offers Rane, who is preparing for a demand offtake for his gulab jamun mix in the coming festive season. "Last year I did sales of about 14 tonnes in the season, this year I am targeting 20 tonnes," he adds. He expects to do Rs 20 lakh worth of business this season.

Dishing it out: Dishant Enterprises' Pradeep Tambe (left) and Asha Enterprises' Milind Rane deal in gulab jamun mix, and custard and milkshake powders

Still, if the likes of Khabia and Rane have to graduate into a bigger league, they will need a huge leg-up from the government. And that could just happen with the Prime Minister indicating that he will open up the food sector first as a precursor to allowing retail FDI (foreign direct investment). To be sure, large-format retail is a logical fit for processed foods simply because retailers internationally are known to set up cold chains. The growth of the processed foods industry would also mean a growth in the number of buyers who want to buy produce at the farmer's doorstep at a fixed price, possibly through contract farming (currently not allowed), which, in turn, reduces the farmer's complete helplessness in the face of severe fluctuations in the market price of perishable commodities. As Dattatreya Raut, a farmer in Shirwal, close to the Chordia Food Park, points out: "Six months back I had to sell my entire onion stock at Rs 2 per kg, the rate is now Rs 10 per kg. Just think what a cold storage facility could have done for me." Adds another farmer in the vicinity, Vithal Chavan: "We need some kind of an assurance on rates and offtake and then we can grow whatever commands a premium in the market. Typically we are reduced to hawking our produce between markets as far as Mumbai or Ahmedabad depending on the rates offered and when the prices crash, we simply have to sell at those prices to any taker. Fixed rates would make all the difference." The good news, though, is that the Union agriculture minister has just amended the APMC Act (Agricultural Produce Marketing Committee), which restricted private players from buying directly from farmers. Also, overall tax rates for the processed foods business are down from an astronomical 39 per cent to 4 per cent in most states.

Bottling it up: Father-son duo Vishnu Kumar Agarwal (left) and Vikas supply moulded plastic jars to the units in the Chordia Food Park

However, there's still plenty more that needs to be done if the foods processing sector is to find its place in the sun. Long-time industry observer K. Radhakrishnan, RPG's Spencer's Retail VP for Merchandising, feels the domestic market for processed foods is far from taking off. "We need a greater push from entrepreneurs and companies in terms of understanding the Indian market and bringing in the relevant intermediary technology and I don't see that happening yet. Processed foods the way I define it will take off only when it starts substituting the main meal. The only category that has made a significant inroad is juices, but that's an expensive product." What's needed clearly are more people who think like Chordia, many more food parks like Chordia's, and many many more entrepreneurs like Khabia and Rane in the Chordia Food Park.