Azadpur Mandi: You'll stop eating vegetables if you saw them here

The Azadpur Sabzi Mandi, a wholesale vegetable bazaar in North Delhi, is touted as Asia's biggest fruit and vegetables market. It may also be the continent's most corrupt and inefficient. Touts control not just the seller but also prices, farmers are shortchanged all the time, and buyers have to make do with shoddy products. Concepts like supply chain management, cold chains, and post-harvest infrastructure are naturally alien here-as in most Indian mandis; and, to that extent, the Azadpur Sabzi Mandi is a microcosm of everything that can go-and does go-wrong in the country's wholesale markets.

Cut now to the National Dairy Development Board's (NDDB's) Safal fruit and vegetable market in Bangalore. The hi-tech market provides a transparent and efficient system for buyers and the sellers to make wholesale transactions. The auction market covers more than 200 farmers' associations and more than 50,000 farmers spread across Karnataka, Andhra Pradesh, Tamil Nadu and Maharashtra. This system allows farmers to plan their production and provides a common platform for buyers and growers to negotiate better rates. By setting up an efficient terminal market for horticultural produce, the NDDB has stimulated productivity, raised quality standards, reduced losses and ensured consumer access to an increasing supply of fresh produce at reasonable prices. In other words, NDDB's market is everything that the Azadpur Sabzi Mandi is not.

Mercifully, the central government has taken notice of the Karnataka example, and has formulated plans to launch eight more such terminals in Nasik, Nagpur and Mumbai in Maharashtra, Rai (Haryana), Bhopal (Madhya Pradesh), Patna (Bihar), Kolkata (West Bengal) and Chandigarh through the National Institute of Agricultural Marketing. Like the existing format in Bangalore, these terminal markets will have a hub-and-spoke format, with the terminal market (the hub) linked to a number of collection centres (the spokes). The scope of these markets, though, would be wider than that of the Safal model, as they will involve more commodities and focus on exports too. "These complexes will cater to domestic as well as export demand as they will be a one-point centre for all commodities; so we are stressing a lot on quality check and grading activities in these centres," says W.R. Reddy, Director (Marketing), Agriculture Ministry.

The terminal markets will offer a wide range of facilities like grading and sorting, electronic auctioning, quality testing laboratories, cold storage, seed-distribution and even banking facilities all under one roof. They will also have post-harvest infrastructure that's needed for threshing, drying, storage and processing. Under this model, there will be no service charges, fewer intermediates, less handling, as well as better and modern infrastructure for handling and processing of perishable produce, ensuring better produce quality, and efficient marketing, thereby benefiting both farmers and consumers. "By doing away with the middlemen and with the e-auction system, these markets will ensure that farmers get the actual price of the produce and are not cheated," says Kalyan Chakravathy, Country Head, Food and Agriculture business, yes Bank, which is also the national consultant and financial advisor to the eight modern terminal market complexes. Agrees Rajesh Srivastava, Rabo India Finance's Managing Director and Head (Corporate and Commercial Banking): "A lot of foodgrain and vegetables are getting wasted because of inadequate infrastructure. India needs 200 such terminals throughout the country." Srivastava has already submitted the feasibility study to several other states. Rabo India Finance is in advanced talks with the West Bengal ministry for setting up a terminal market near Kolkata.

The terminal markets will be either built, owned and operated by a corporate or by a consortium of companies. The investment will be shared by the private companies and the central government in the ratio of 51:49. For the retail companies involved, the terminal market will be a direct source of procurement for their own shelves. Companies such as Reliance, Tata Chemicals, Voltas, DLF, FieldFresh and Pantaloon are a few that have bid for partnerships in the terminal market complexes. "For our upcoming cash and carry stores, the terminal markets will be a perfect procurement centre for all kinds of food items," says Saurabh B. Chadha, Head (New Projects), Pantaloon Retail. Markets like the Azadpur Sabzi Mandi will by then hopefully be resurrected.

-Pallavi Srivastava

French Shot in the Arm
Unique deal: A global player buys into an Indian biotech venture.

Shantha Biotech's Reddy: New stakes

It's the first-of-its-kind deal in the Indian biotech space, where a global player has bought a stake in an Indian venture. Shantha Biotechnics, the Hyderabad-based bio-pharma company, has parted with a 60 per cent stake to Mérieux Alliance, a French biotech group. This follows the decision of Shantha's Omani partner and some non-resident Indian partners (who totally owned 60 per cent of the company's equity) to exit.

"This gives us access to resources and a network," says Shantha founder K.I. Varaprasad Reddy, who will continue to hold 16.5 per cent and will also remain the Managing Director. "Investing 25 per cent of our turnover in R&D would have at best given us $3-4 million (Rs 13.5-18 crore) for innovation and here is a company whose annual R&D budget is m300 million (about $400 million)," explains Reddy. His logic? Even if 25 per cent of this is meant for vaccines, it would work out to $100 million (Rs 450 crore). While the companies are silent about the valuation of the deal, speculation is that the company (Shantha) is valued at close to Rs 1,000 crore.

-E. Kumar Sharma

Back in the High Life
The FMCG industry is on the growth trail once again.

The Rs 70,000 crore fast moving consumer goods (FMCG) industry seems to be back to its winning ways. In the quarter ended September 2006, a majority of companies registered impressive growth, of between 15 per cent and 50 per cent, in sales; the growth in profits for the top 12 listed FMCG companies has been over 40 per cent. That's a sharp turnaround from the dismal period between 2000 and 2003, when these consumer goods companies were growing sluggishly in single digits (3-5 per cent). What's more, the growth momentum of the recently-concluded quarter is expected to continue for the rest of the year.

Says Rajan Varma, Chief Financial Officer, Dabur India: "There is a renewed buoyancy in demand across product categories and it is evident from the fact that a large part of our growth has come from an increase in volumes." Dabur India's consolidated net sales grew 21 per cent to Rs 564 crore over the previous year's corresponding quarter and net profits were up 26 per cent to Rs 79 crore.

Similarly, for Marico, the top line and bottom line grew 37 per cent and 34 per cent, respectively; ITC's FMCG business (outside cigarettes) grew 46 per cent and the agri-revenues grew 86 per cent year on year. Results for the FMCG behemoth, Hindustan Lever (HLL), were also quite impressive-a top-line growth of 12 per cent (net sales at Rs 3,066 crore) and a bottom line growth of around 18 per cent (60 per cent, if extraordinary income of around Rs 137 crore is taken into account). Says D. Sundaram, Finance Director, HLL: "Sales growth has been driven by an underlying volume increase, product mix improvement and price growth. Of our total growth in the FMCG business, 11 per cent came from volumes and improvements, whereas the balance came from price increases."

According to analysts the factors that have led to such a stupendous quarter include rising consumption thanks to increase in incomes, both in urban and rural India, new channels of sales, modern trade, a focus on markets beyond metros and class-I towns, new product launches and an increased spend on advertising and marketing. Analysts say it is the overall positive sentiment that is prompting companies to expand into newer markets and categories. Companies like Marico and Dabur are taking the plunge into the ready-to-eat foods segment, ITC has also added more products in its foods portfolio and has also entered the fragrances market and HLL, Tata Tea and Godrej Consumer Products are also expanding into newer businesses like high-end tea, energy drinks and grooming products. The fast moving days are back for the FMCG sector.

-Archna Shukla

Great Shop in the Sky
Bored in mid-air? Check out the hostesses' goodie bag.

With few options at hand to relieve mid-air boredom, the concept of 'shopping-on-board' is something frequent fliers might just lap up. Domestic airlines such as Kingfisher, GoAir and Deccan Airways already have such shops in the sky by partnering with merchandising companies. Recently Vijay Mallya's Kingfisher Airlines launched the 'Air Boutique', by allying with New York-based merchandising company, Royal Images, which offers the SkyMall concept in us airlines like American Airlines and Delta. On offer are 50 products, from a BMW Mclaren F1 GTR to Skagen Watch, in the Rs 200-4,250 price bracket. "These products are available exclusively on the flights and nowhere else in the country," says Girish Shah, Sales Head, Kingfisher. The airline generates a daily business of Rs 25,000-50,000. The purchase is done through catalogues only. Payment is via credit cards and products are dispatched to the travellers' address within seven days. "We are already there in the us in almost all airlines and though it is a no-discount and not an immediate-delivery model, it has been quite successful; we would be increasing the product portfolio soon," says Abhijit Bhandari, CEO, Royal Images.

While Kingfisher is a fairly new entrant, Air Deccan and GoAir have been offering the 'shop in the sky' experience to travellers for some time now, albeit in a slightly different garb. Passengers are required to bid for products in the catalogues and the lowest bidder carries the prize home. The shopping partner for both the airlines, AVA Merchandising, offers products on discount and changes the catalogue every month. Air Deccan, which had launched the service last year itself with a 40-product catalogue (with a nearly 50 per cent discount under the initiative 'brand-for-less'), has now switched to a nine-product bidding system. And as far as Captain G.R. Gopinath is concerned, sales revenues are doubtless a priority. "We aim to increase non-passenger revenues from the current 7 per cent to 20 per cent in the next 2-3 years," says the Air Deccan CEO. "Apart from the bidding model, we are also looking at catalogue sales to augment revenue," adds the CEO of the low-cost airline. Deccan did business worth a cool Rs 2 crore in October from in-flight shopping, say company officials. Not quite in that league, but still significant, are GoAir's sales, worth Rs 50 lakh in October. "Our in-flight shopping where one can buy premium brands offers discounts of up to 65 percent," says Raj Halve, Chief Commercial Officer, GoAir. Halve claims GoAir flyers enjoy two benefits: One is a cheap flight, and the other is a saving on purchases made. The Wadia-promoted airline expects the in-flight initiative to contribute close to 7 per cent to turnover in a year.

The merchandisers for their part have huge expectations. AVA Merchandising expects to hit a turnover of Rs 75 crore by 2007 via its arrangement with the three airlines (Indigo is the third). It has also proposed a duty-free-on-board-shopping concept to Air India, which is expected to foray into sky-shopping soon. Indigo Airlines will soon launch a unique 'super-saver' model, for which it has tied up with AVA. "Volumes are important to be able to offer customers attractive prices," says Anil Sharma, Director, AVA Merchandising. The airlines, meantime, which haven't been having it easy, could do with another revenue stream.

-Pallavi Srivastava