Indian Condiments and Pickles Opportunities for Commercial Production in Australia

Home , Balti (food), Chana masala, Chutney, Dal, Dopiaza, Gongura

by Suku Bhaskaran Australian Food Marketing Centre, Victoria University of Technology

A report for the Rural Industries Research and Development Corporation

October 1999 RIRDC Publication No 99/138 RIRDC Project No AFM-3A

ISBN 0 642 57984 9 ISSN 1440 - 6845

Indian Condiments and Pickles – Opportunities for Commercial Production in Australia Project No: AFM-3A Publication No: 99/138

The views expressed and the conclusions reached in this publication are those of the author and not necessarily those of persons consulted. RIRDC shall not be responsible in any way whatsoever to any person who relies in whole or in part on the contents of this report.

This publication is copyright. However, RIRDC encourages wide dissemination of its research, providing the Corporation is clearly acknowledged. For any other enquiries concerning reproduction, contact the Publications Manager on phone 02 6272 3186.

Researcher & Contact Detail Mr Suku Bhaskaran Australian Food Marketing Centre Victoria University City Campus (C069) Level 10 300 Flinders Street MELBOURNE VIC 3000

PO Box 14428 MELBOURNE CITY MC VIC 8001

Phone: 03 9 248 1053 Fax: 03 9 248 1021 Email: [email protected]

RIRDC Contact Details Rural Industries Research and Development Corporation Level 1, AMA House 42 Macquarie Street BARTON ACT 2600

PO Box 4776 KINGSTON ACT 2600

Phone: 06 272 4539 Fax: 06 272 5877 Email: [email protected] Website: http://www.rirdc.gov.au

Published in October 1999 Printed on environmentally friendly paper by Canprint

Foreword

This report reviews the opportunity to establish in Australia an import-replacing and export-oriented South Asian culinary products industry based on the produce of our new and emerging rural industries. The report indicates that a viable South Asian culinary products industry can be established and that this could enhance the viability of producing new rural crops such as mangoes, lemons, spices and ginger.

This report, a new addition to RIRDC’s diverse range of over 400 research publications, forms part of our Asian Foods R&D program, and complements several other reports based on research that were commissioned by the Corporation. These reports have proven to be extremely popular with industry and government and have gone into numerous reprints.

Most of our publications are available for viewing, downloading or purchasing online through our website: • downloads at www.rirdc.gov.au/reports/Index.htm • purchases at www.rirdc.gov.au/pub/cat/contents.html

Peter Core Managing Director Rural Industries Research and Development Corporation

Acknowledgements

The study was conceptualised and developed by the Australian Food Marketing Centre, Victoria University. The research was supported through a grant from the Rural Industries Research and Development Corporation. Dr Jeff Davis of the Rural Industries Research and Development Corporation provided advice, made valuable comments and editorial input on the draft report. Support from the Rural Industries Research and Development Corporation, financially and in many other forms, is gratefully acknowledged.

The report is based on published trade literature and extensive field study. During the field study more than 250 key informants in food companies (manufacturers, retailers, wholesalers, importers and exporters) in Australia, the United Kingdom, India, Malaysia and Singapore were interviewed. We also received valuable input and advice from raw material suppliers, suppliers of machinery and equipment and building contractors. We would not have been able to complete this study without the support and guidance of these specialists.

The principal researcher and author of the report was Suku Bhaskaran but some chapters in the report were prepared by or in collaboration with other persons. The authors and co-authors, where relevant, are acknowledged in the individual chapters. Ms Angelina Rizk was responsible for the word processing, layout and presentation of the report.

While several individuals contributed to the preparation of the report, responsibility for the views expressed and for any errors, omissions and limitations is solely that of the principal author.

Suku Bhaskaran

4 TABLE OF CONTENTS Page

Foreword 3 Acknowledgments 4 List of Tables 8 List of Figures 8 List of Diagrams 9 About the Author 10 Executive Summary 11

Chapter 1: Background and Overview of Study 14 1.1 Background 14 1.2 Overview of Trends and Opportunities in Product Market 15 1.3 Relevance and Benefits 15 1.4 Methodology 17 1.4.1 Market Opportunity in Australia: Import Replacement 17 1.4.2 Evaluation of Export Opportunities 18 1.5 Overview of Report 19

Chapter 2: Market Trends in Australia for South Asian Culinary Products 20 2.1 Research Methodology 20 2.2 Market Characteristics and Trends 21 2.2.1 Sales Trends in Supermarkets 21 2.2.2 Brand Market Share in Supermarkets 23 2.2.3 Product Lines – Supermarkets 24 2.2.4 Sales in Other Market Segments 25 2.2.5 Market Size 26 2.2.6 Product and Brand Sales Mix in South Asian Stores and Food Service Outlets 28 2.2.7 Brand Market Share: Supermarkets, South Asian Stores & Food Service Segment 28 2.2.8 Distribution 31 2.3 Specialist Food Suppliers 31 2.4 Other Importers and Wholesalers 31 2.5 Consumer Market Characteristics 31 2.6 Shift in Principal Purchase Source by Ethnic Consumers 33 2.7 Processing Sector 33 2.8 Conclusions 33

Chapter 3: Product Market Trends for South Asian Culinary Products in the United Kingdom 37 3.1 Introduction 37 3.2 Methodology 37

5 3.3 Market Overview 37 3.4 Market Segments 39 3.4.1 Food Service Markets 39 3.5 Retail Markets 41 3.6 Manufacturers 46 3.7 Margins and Competition 50 3.8 Advertising 51 3.9 Conclusions 52

Chapter 4: Case Study, Patak (Spices) Ltd - The Rising Star 54 4.1 Authentic Origins 55 4.2 Key Ingredients for Success 56 4.3 Authentic and Accessible 58 4.4 Patak’s Around the World 61 4.5 Indian - Not Ethnic 62

Chapter 5: Case Study, Sharwood’s - The Next Challenge 68 5.1 Colonial Beginnings 69 5.2 The Ethnic Niche Expands 71 5.3 Intense Rivalry in the Authentic Indian Niche 71 5.4 The Foodservice Sector 72 5.5 Manufacturing and the International Scene 72 5.6 New Product Development 73 5.7 Promotion 74 5.8 The Future 74

Chapter 6: Market Characteristics – India, Malaysia and Singapore 82 6.1 Introduction 82 6.2 Research Methodology 82 6.3 Market Overview – India 83 6.4 Market Overview - Malaysia and Singapore 87 6.5 Conclusions 89

Chapter 7: Production Facility: Pre-Feasibility Report 96 7.1 Introduction 96 7.2 Assessment of Project Viability 96 7.2.1 Assumptions 96 7.3 Production Process 99 7.4 Profit Analysis 110

Chapter 8: Findings and Conclusions 154 8.1 Project Overview 154 8.2 Summary - Key Elements of the Project 154 8.3 Summary - Key Findings 155

6 Appendices Appendix 2.1 Names of Importers and Distributors 34 Appendix 4.1 The Regions and Cuisine of India 64 Appendix 4.2 Product Names and Descriptions 66 Appendix 5.1 Sharwood’s - The Beginnings of the Chutney Trade 76 Appendix 5.2 Magical TV Success for Green Label Chutney 77 Appendix 5.3 Sharwood’s Product List (Retail) 78 Appendix 6.1 Companies and Product Range 90 Appendix 7.1 Wholesale Fruit and Vegetable Suppliers 113 Appendix 7.2 Brief Technical Specifications, Processing Plant 118 Appendix 7.3 Building Plan 121 Appendix 7.4 Effluent Treatment 122 Appendix 7.5 Specifications - Equipment for Good Receipt, Processing and Packaging 127 Appendix 7.6 Specification - Service Equipment 131 Appendix 7.7 Raw Material and Ingredients for Manufacturing Pickle - 60 Tonnes 133 Appendix 7.8 Raw Material and Ingredients for Manufacturing Mango Chutney - 240 Tonnes 134 Appendix 7.9 Raw Material and Ingredients for Manufacturing Curry Paste - 180 Tonnes 135 Appendix 7.10 Raw Material and Ingredients for Manufacturing Curry Sauce - 60 Tonnes 136 Appendix 7.11 Raw Materials Requirements – Plant Capacity 540 Tonnes 137 Appendix 7.12 Raw Materials for Producing 60 Tonnes of Pickles 138 Appendix 7.13 Raw Materials for Producing 240 Tonnes of Chutney 139 Appendix 7.14 Raw Materials for Producing 180 Tonnes of Curry Paste 140 Appendix 7.15 Raw Materials for Producing 60 Tonnes of Curry Sauce 141 Appendix 7.16 Costs of Packaging Material 142 Appendix 7.17 Specifications, Spices 143 Appendix 7.18 Specifications, Other Ingredients and Additives 146 Appendix 7.19 Details of Built Up Areas and Estimated Cost 148 Appendix 7.20 Plant and Machinery 149 Appendix 7.21 Wholesale Price of Finished Products in Glass Bottles 151 Appendix 7.22 Costs of Fuel: Power, Water and Other Utilities 152 Appendix 7.23 Personnel Cost 153

Selected References 158

RIRDC Publications 159

7 LIST OF TABLES

Table 2.1: Major Sources of Imports, South Asian Culinary Products, Chutney and Pickles 27 Table 3.1: Trends in Sales Turnover of South Asian Culinary Products, Retail Segment 38 Table 3.2: Curry Paste, Curry Sauce, Chutney and Pickles: Retail Turnover 43 Table 3.3: Curry Sauces, Sales Trends of Product Varieties 43 Table 3.4: Major Manufacturers - Product Category Sales, Market Share and Sales Trend 47 Table 3.5: Patak’s and Sharwood’s UK Business in South Asian, Accompaniments and Ingredients, 1997 and 1998 48 Table 3.6: Wholesale Price Comparison for Selected Product Lines: Sharwood’s and Patak’s 49 Table 3.7: Prices on Sainsbury’s Shelves, 15.7.98 50 Table 3.8: Comparison of Advertising Expenditure – Patak’s and Sharwood’s 51 Table 4.1: Fastest Growing Brands of Food Products in the UK, 1993-1996 54 Table 6.1: Export Destinations of Pickles, Chutneys, Sauces, and Pastes from India (1992-93 to 1994-95) 84 Table 6.2: Exports Destinations of Pickle and Chutney from India (1992-93 to 1994-95) 85 Table 6.3: Exports Destinations of Curry Powder from India (1992-93 to 1994-95) 86 Table 6.4: Imports of Condiments, Sauces and Chutneys from India – Australia, Singapore and Malaysia 88 Table 7.1: Profit and Loss Statement, Plant Capacity 540 Tonnes (50% Capacity Utilisation) 110 Table 7.2: Profit and Loss Statement, Plant Capacity 1,080 Tonnes 111 Table 7.3: Processing Costs and Ex-Factory Sale Prices 112

LIST OF FIGURES

Figure 2.1: Product Positioning in Supermarket Segment 22 Figure 2.2: Indian Foods - Sales Trends in Supermarkets 1993 – 1997 23 Figure 2.3: Trends in Brand Market Share, Supermarket Segment 24 Figure 2.4: Product-Mix Foodservice, Supermarket and South Asian Stores 25 Figure 2.5: Product Market Segments for South Asian Culinary Products In Australia 26 Figure 2.6: Curry Paste, Brand Market Share 29 Figure 2.7: Chutney, Brand Market Share 30 Figure 2.8: Pickles, Brand Market Share 30 Figure 3.1: Product Market Segments for South Asian Culinary Products in the UK, 1997 40 Figure 3.2: South Asian Culinary Products, Source of Purchases by Food Service Outlets 41 Figure 3.3: Brand Market Share, South Asian Culinary Products in the UK (Retail Segment) 41 Figure 3.4: Product Line Market Share, Retail Segment (Total Market Value - £112 million) 42 Figure 3.5: Retail Brand Market Share, Canned Sauces (Market Value - £17.5 million) 44 Figure 3.6: Retail Brand Market Share, Bottled Curry Sauces (Market Value - £43.8 million) 44 Figure 3.7: Retail Brand Market Share, Curry Paste (Market Value - £6.6 million) 45 Figure 3.8: Retail Brand Market Share, Chutney (Market Value - £8.6 million) 46 Figure 6.1: Trends in the Production of Pickles and Chutneys, 1985-1993 ('000) 83

List of Diagrams

Diagram 7.1A: Stage 1 - Preparation of Semi-Processed Raw Materials, Pickles 101 Diagram 7.1B: Stage 2 - Mixing Additives to Semi-Processed Products, Pickles 102 Diagram 7.1C: Stage 3 - Bottling and Packaging Process, Pickles 103 Diagram 7.2A: Stage 1 - Preparation of Mango Chutney 104 Diagram 7.2B: Stage 2 - Bottling and Packaging Process, Mango Chutney 105 Diagram 7.3A: Stage 1 - Preparation of Curry Paste 106 Diagram 7.3B: Stage 2 - Bottling and Packaging Process, Curry Paste 107 Diagram 7.4A: Stage 1 - Preparation of Curry Sauce 108 Diagram 7.4B: Stage 2 - Bottling and Packaging Process, Curry Sauce 109

9 Rural Industries Research and Development Corporation

The Rural Industries Research and Development Corporation (RIRDC) is a statutory corporation formed in July 1990 under the Primary Industries and Energy Research and Development Act 1989.

The RIRDC’s mission is to manage research and development investments on behalf of government and industry for the benefit of the people of Australia through:

Enhancing innovation in the rural and related sectors

Fostering the development of new industries; and

Addressing strategic issues facing the rural sector

The Corporation, based in Canberra, has a Board of nine directors and employs 18 full - time staff.

Australian Food Marketing Centre

The Australian Food Marketing Centre (AFMC) is a unit within the Faculty of Engineering and Science, Victoria University. AFMC is a research, consultancy and training services provider to the agricultural and livestock food sectors. AFMC has completed projects for R&D Corporations (example: Australian Centre for International Agricultural Research; Dairy Research and Development Corporation; Meat Research Corporation; Pig Research and Development Corporation; Rural Industries Research and Development Corporation), government departments (example: Department of Foreign Affairs and Trade; Department of Employment, Education, Training and Youth Affairs) and several business corporations (example: Carlton and United Breweries; Sakata Rice Snacks). The AFMC has also been commissioned by organisations such as AUSTRADE, Crawford Fund for International Agricultural Research, Australian Chamber of Manufactures and Gilbert Chandler College to provide food-sector related training services. AFMC has an active research and consultancy program in Asia, and has excellent collaborative linkages with several research organisations in Asia. The AFMC has organised several special events in-country on various themes relating to the food sector. Under this program, more than 70 senior executives, government officials and researchers from various Asian organisations have been guests of the AFMC.

About the Author

Mr Suku Bhaskaran (Executive Director, Australian Food Marketing Centre of Victoria University) is the principal author and editor of this report. Suku has completed several Asia focused trade and investment research and consultancy projects. Suku's research focus is in marketing and public policy matters pertaining to the food industry.

10 EXECUTIVE SUMMARY

BACKGROUND In the early 1990s the consumption of curry sauces, curry paste, chutneys and pickles in the United Kingdom (UK) expanded rapidly. This was fostered by developments such as:

Increased consumer demands for ‘new’ flavours and food experiences

Increased exposure to Indian foods

Changing dietary habits fostered through health and food safety concerns

In addition to these environmental dynamics, two United Kingdom based manufacturers (Patak’s and Sharwood’s) identified market opportunities and undertook substantial product and packaging innovation, advertising, promotion and consumer education programs. These activities increased product knowledge and the demand for their products. By 1997, the UK market for Indian foods was $600 million. More recently, Patak’s and Sharwood’s have expanded their business into Europe, United States and Australia.

By the mid 1990s trends experienced in the UK also became evident in Australia. Patak’s and Sharwood’s developed a sizeable export business to Australia. In 1997 retail sales of Indian foods in Australian supermarkets was estimated at $17 million with Patak’s and Sharwood’s combined market share exceeding 90 per cent.

The study postulates that since Australia already produces many raw materials (mango, lemon, ginger, garlic, spice and other produce) used in the manufacture of curry sauces, curry powders, chutneys and pickles (South Asian culinary products) an import- replacing and export-oriented industry could be developed in the country.

RESEARCH METHODOLOGY The study incorporates (a) an analysis of product-market trends and opportunities within Australia (b) a review of product-markets in the UK, India, Malaysia and Singapore including competitive threats and market opportunities (c) a review of the activities of major international manufacturers (competitive threats), and (d) an assessment of the viability of establishing this industry in Australia. The research on the product-market in Australia, the United Kingdom, India, Malaysia and Singapore involved the following procedures:

Review of trade literature

Retail shop audits covering chain stores and discount stores

In-depth interviews with key informants in supermarkets and companies importing and wholesaling these products, and

In-depth interviews with owners/managers of restaurants and ‘take-aways’ serving South Asian cuisine.

On completion of the market evaluation a pre-feasibility study was undertaken to assess the viability of establishing South Asian culinary industry in Australia. In-depth interviews were then conducted with suppliers of raw materials, ingredients, machinery and equipment. Finally, discussions were completed with key informants in selected manufacturing companies of sauces and pastes.

FINDINGS

Domestic Market Size

Demand for South Asian culinary products in Australia has continued to expand.

Market size measured in terms of retail sales value in 1998 was estimated at $38 million.

The mainstream market (supermarket segment) represents 29 per cent ($11.05 million in retail sales value) of the market.

More than 90 per cent of the products sold in supermarkets are imported from the UK.

The largest market segment for these products are the South Asian Stores and Food Service Outlets.

Significant differences are evident in product and brand choices in the three major segments (Supermarket, South Asian Stores and Food Service Outlets) of the product market. Brands from the UK (especially Patak’s and Sharwood’s) dominate the Supermarket segment. Products from India (particularly Ashoka and Pachranga) are dominant in South Asian Stores and Food Service Outlets. Curry sauces are the leading product line selling in Supermarkets, chutneys in Food Service Outlets and pickles in South Asian Stores.

Growth Potential

Trends in the product market in countries such as the UK suggest sales off-take in Supermarkets could expand as innovative new products and packaging are introduced, and second and third generation migrants from the Indian sub-continent shift their purchases of these products from ethnic grocery stores (South Asian Stores) to supermarkets.

South Asian culinary products are a new and innovative product line to the mainstream Australian market. Further scope exists for the market to expand as consumers develop greater product knowledge.

Dynamics in the market place such as health concerns regarding high consumption of red-meats and shift by segments of the population to vegetarianism, increasing demand for marinades and the popularity of all-season barbecues could also influence demand for South Asian culinary products.

12 Export Opportunities

Review of the UK market and case studies on Patak’s and Sharwood’s suggest considerable potential exists to expand sales into the UK, USA and Europe. From their UK base, Patak’s and Sharwood’s already export to Europe and the USA. Small-scale manufacturers in India have developed exports of chutneys and pickles to the UK (1994-95: 4,365 tonnes) and USA (1994-95: 1,487 tonnes).

Review of the industry in India suggests the existence of opportunities to export chutneys and pickles to Middle Eastern countries including the United Arab Emirates, Saudi Arabia and Kuwait. In 1994-95 small-scale Indian companies exported about 3,000 tonnes of pickles and chutneys to these countries.

Competitive Threats

Indian companies are unlikely to present a major threat to the Australian industry. The condiment and pickles sector in India is dominated by small-scale enterprises that have not invested in modern production processes or in developing their brand positions in the international market.

The Indian government is encouraging fruit and vegetable processors to develop strategic alliances with international food manufacturers. This has encouraged many fruit and vegetable processors to contract manufacture products such as tomato puree, tomato paste and pickled gherkins. It appears that the fruit and vegetable industry in India is not geared to market branded and value-added products in the international market.

The major competitors to Australian companies entering this industry would be the two UK based companies, Patak’s and Sharwood’s.

Project Viability and Profitability

Most raw materials (mango, lemon, ginger and spice) used for manufacturing the product-lines and reviewed in this study can be competitively purchased in Australia.

A modern but small-scale green field project is estimated to cost $3.76 million.

If the production facility operates at 50 per cent capacity and achieves a 17 per cent penetration of the domestic market (sales turnover: $3,748,800), it could generate a net operating profit (before tax and interest) of $0.84 million.

If the production facility operates at full capacity and achieves a 34 per cent penetration of the domestic market (sales turnover: $7,497,600), it could generate a net operating profit (before tax and interest) of $2.89 million.

The above production levels are based on a single shift operation and, therefore, there is substantial scope for scaling-up the operation.

A viable industry targeting the domestic and international markets could feasibly be developed in Australia.

13 Chapter 1: Background and Overview of Study

Suku Bhaskaran

1.1 Background

In a study commissioned by the Rural Industries Research and Development Corporation (RIRDC), the Centre for International Economics (1992) reported that Australia’s food processing industries were overwhelmingly dependent upon the export of minimally processed foods. In contrast, Australia’s food imports were predominantly value-added and highly processed food products. The Centre for International Economics attributed this dichotomy between processing levels in food imports and exports to the following leading factors:

Australia's non-competitiveness in value-added food manufacturing

The profile, image and positioning of Australian proprietary brands, and

Shortcomings in market knowledge and marketing expertise.

The Centre for International Economics identified these weaknesses as a major barrier to Australian companies maximising their competitive advantages, especially relating to Australia’s extensive agricultural land resources, varied climatic conditions and close proximity to high growth export markets.

Research by the Australian Food Marketing Centre and several commissioned research studies by RIRDC suggest certain characteristics of export markets act to constrain Australian companies gaining access to the ‘Western’ foods segments in these markets. The principal market characteristics identified included the following:

The slow pace of change in dietary habits in target export markets in Asia, resulting in constrained demand growth for ‘Western’ food products, and

Competitive strengths of global corporations in manufacturing and exporting ‘Western’ food products. For example, companies such as Heinz, Nestles and BSN appear to have substantial competitive and comparative advantages: early mover advantages, internationally recognised brand-names, substantial capital resources, sharing of resources within an international network of subsidiary, associate and joint-venture companies. In view of this, opportunities for exporting value-added food products depend on either substantial increases in the consumption of ‘Western’ foods (through changes in dietary habits) and/or the perceived superior attributes of food products from Australia. It would also appear new entrants to these markets may experience difficulty competing with established international companies. Bhaskaran and Sillitoe (1995), Bhaskaran and Irwin (1995) and Bhaskaran and Sharma (1996) suggest that, in the short to medium term, Australian companies could do well to adopt strategies aimed at developing and marketing indigenous food products to selected target export markets. The current study investigates the potential opportunities for the establishment of an import-replacing and export-oriented Indian curry sauce, curry paste, chutney and pickles industry in Australia.

14 1.2 Overview of Trends and Opportunities in Product Market

Consumption of Indian foods (South Asian culinary products) has expanded substantially in countries such as the United Kingdom (UK) and the United States of America (USA). Retail sales value of packaged and branded ‘ethnic’ foods in the UK is about A$600 million (Mintel, 1991). South Asian culinary products (market share of 47 per cent) are the largest product category in the ethnic foods segment (Frozen and Chilled Foods, 1992). Information in several trade publications suggests that the UK market for South Asian culinary products is expanding rapidly. These trends in the UK appear to have been replicated in Australia. Although a relatively recent introduction into Australian supermarkets, sales of South Asian culinary products have expanded substantially. In 1993 retail sales of South Asian culinary products in the supermarket segment was $11.1 million. By 1997 this had increased to $17 million and compared favourably with the retail sales value of Chinese and other East Asian stir-fry sauces. According to The Retail World (1994, December 12) Australian marketeers forecast that ‘Indian foods’ will be the next big international cuisine in the Australian market.

The Patak’s and Sharwood’s brands, both imported from the UK, account for nearly 90 per cent of the total product category sales in supermarkets. Since large volumes of fruits, vegetables and spices the principal ingredients used in the manufacture of these products are already grown in Australia, it seemed probable an import-replacing and export-oriented processing industry could be developed.

1.3 Relevance and Benefits

Production of South Asian culinary products could provide opportunities for further ancillary value-added products for Australia’s herb, spice, horticulture, fruit and edible nut sectors. The development of downstream processing industries utilizing these raw materials would help overcome some of the problems these industries face. At present growth of these industries is constrained by:

The smallness of domestic demand for these products

Competition from lower-cost producers such as China

The highly perishable nature and limited shelf-life of these products

Seasonality in the production of these crops, thus restricting year round product availability

High transport costs relative to unit product costs, thereby adding to final product costs

Oversupply conditions and hence pressures on prices in the domestic market, and

Problems associated with the adoption of branding and product differentiation strategies

A review of published literature and exploratory surveys point out that increased production in industries such as herbs and spices, and new horticultural crops such as mangoes are fostering the need to develop processed foods that use these raw materials.

15 This would enable market expansion of the market for these products by creating demand from the food-processing sector. The present study postulates that downstream processing would enable producers of these new crops to overcome problems associated with product perishability, transport costs, competition from low cost producers, oversupply and the adoption of product differentiation strategies.

Raw material producers to benefit from the start-up of a manufacturing industry for South Asian culinary products include the following:

Herbs and spices (aniseed, coriander, cinnamon, chilli, ginger, garlic and mustard)

New horticultural crops (eggplant, lime, lemon and mango)

Fruits and nuts (almond, cashew, pine-nut, sultana and raisin)

Major Australian horticultural crops (cauliflower and tomato)

Specific problems faced by these industries include the following:

Ginger. In 1993-1994, Australia produced 3,300 tonnes of ginger. Most of this product was sold domestically, with only 402 tonnes exported. All exports were made by one company (Buderim Ginger Limited) destined to one market (Japan). Buderim Ginger Limited reports that their exports to Japan are now under threat from low-cost producers such as China.

Lemon and Lime. In 1993-1994, Australia produced 36,000 tonnes of lemons and limes and 23,718 tonnes of mangoes with all production sold on to the domestic market. It was reported (Castles, 1996) that, even with aggressive export market promotion, the high cost of air-freight and lack of a suitable storage system for sea freight would make it difficult to export these products. Production has been increasing rapidly resulting in over-supply in the domestic market.

Herbs and Spices. Australia produces approximately 2,400 tonnes of herbs and spices annually. These include crops such as coriander, fenugreek, aniseed, caraway, cumin, coriander, dill and fennel. In addition, Australia imports approximately 4,200 tonnes of herbs and spices annually. Almost the entire production is either re-packed for retail sales or bulk packed for sale to traders, brokers, importers and wholesalers. It has been estimated the food processing industry in Australia uses approximately 4,470 tonnes of herbs and spices annually. Herbs and spices are used by manufacturers of canned foods, frozen foods, sauces, bakery products and small- goods. Australia has extensive agricultural land and diverse climatic conditions, which would enable the development of the spice and herb industry. However, such as industry has not taken-off in Australia owing to the relatively small domestic market and low-priced imports. The development of a down-stream, value-adding industry which can up-take domestic production would provide the necessary volume to sustain and develop the herb and spice industry in Australia.

Tomatoes. Although tomatoes are one of Australia's largest vegetable crops the domestic market for fresh tomatoes appears to have steadily declined. Castles (1995) reported that the acreage under tomato cultivation and output of tomatoes in

16 Australia had progressively decreased. The area sown to tomato crops decreased from 125,800 hectares in 1989-1990 to 117,700 hectares in 1992-1993 so that production declined from 322,100 tonnes in 1989-1990 to 290,800 in 1992-1993.

1.4 Methodology

1.4.1 Market Opportunity in Australia: Import Replacement

Marketing audit was the principal technique used in this research. In the exploratory research phase marketing audits involved physically ‘scanning’ grocery retail shelves to collate information on product, price, place and promotion (marketing-mix). This was followed by an exploratory and descriptive research phase undertaken through interviews with key informants, observation surveys and desktop research.

The retail shop audit and discussions with trade representatives enabled the researchers to compile a schedule of major South Asian culinary products available in Australia. The schedule provides information on: (a) product-lines (b) pack-sizes (c) brand-names (d) country of origin of products (e) shelf-space allocated to product-lines in grocery outlets (f) type of retail outlets through which the products are sold (supermarkets, ethnic retail outlets, delicatessen) (g) product positioning (cooking ingredient, ready-to-eat meal, spread, dip etc) (h) perceptual mapping (quality image, price sensitive market etc) (i) brand loyalty and brand-switching behaviour (j) characteristics of ‘heavy’ buyers (k) effect of a change in advertising or distribution strategy on product merchandising (l) features of product labelling (m) name and contact details of importers, and (n) name and contact details of manufacturers

This information was cross-tabulated and analysed to ascertain whether certain market characteristics, such as product, packaging, pack-size, country of origin and point of purchase preferences, could be established.

Retail shop audits and information from desktop research were then used to develop a sampling frame for in-depth interviews. A questionnaire comprising open-ended and multichotomous close-ended questions was used to structure the in-depth interviews of key informants: importers, resellers and food service outlets.

17 Subsequently, in-depth interviews were conducted through face-to-face interviews (in the premises of the firms that agreed to participate in this research) or through telephone interviews. Before the commencement of the in-depth interviews a set of dummy tables was developed. A dummy table is one used to catalogue the data collected and provides a statement on how the data analysis will be structured and conducted.

The objectives of the in-depth interviews were to: (a) explore in detail some of the findings in the retail shop audit (for example: the performance of products and brands in terms of market-share, changes in sales performance, profitability etc) (b) explore the causes (based on the market experience and marketing strategies adopted at the firm level) for the differences in the level of product acceptance (by categories, by market segments etc) (c) identify and seek explanations for inter-firm differences in marketing strategy and performance (d) identify the determinants of product selection and marketing strategy choice decisions at the firm level.

In addition to the product-line analysis, other elements relating to strengths and weaknesses of the firms such as their financial resources, quality of production technology, R&D strengths, patents, trade-marks, distribution infrastructure, marketing skills, pricing structure, publicity, sales force, organisation of departments, and work flow were also analysed.

The marketing audit, depth interview and participant observation were a prelude to developing forecasts of medium-term and long-term sales trends. Information on the importing and distributor firm's past behaviour, attitudes, and characteristics were used to forecast short and medium-term trends in the industry. The importer's past behaviour included dimensions such as purchase history, purchase trends, marketing strategies, and performance indicators.

1.4.2 Evaluation of Export Opportunities

The next phase of this study involved researching the large international producers of South Asian culinary products (such as Patak’s and Sharwood’s). The objective of this exercise was to determine the growth strategies and plans of these companies, and analyse the capacity of Australian firms to (a) compete with these firms in the domestic and export markets, (b) supply minimally processed `intermediate' goods to these firms.

The research methodology included: (a) face-to-face structured in-depth interviews with the representatives of these firms (Patak’s, Sharwood’s) in UK (b) exploratory survey of distributors, manufacturers and resellers of South Asian culinary products in the UK, Malaysia and Singapore (c) review of trade literature and electronic databases of product market opportunities and threats.

18 A section on research methodology is included in relevant chapters, and explains the methodology in greater detail.

1.5 Overview of Report

This report is structured as follows:

Chapter 2 - Information on the Australian market Chapter 3 - Information on the UK market Chapter 4 – Case Study (Patak’s) Chapter 5 – Case Study (Sharwood’s) Chapter 6 – Information on markets in Singapore, Malaysia and India Chapter 7 – Pre-feasibility study Chapter 8 – Conclusions

19 Chapter 2: Market Trends in Australia for South Asian Culinary Products

Suku Bhaskaran and Mukesh Gupta

2.1 Research Methodology

The present study was completed through auditing chain stores and discount stores (Supermarkets), in-depth interviews of key informants (principally, section supervisors) in supermarkets, importers and wholesalers of South Asian culinary products, and in- depth interviews of the owners/managers of South Asian restaurants and take-aways (Food Service Outlets). The sampling frame for the survey was drawn from the Yellow Pages 1996/97 for each State and Territory and further developed from information on importers that the researchers obtained from various sources in the course of the retail shop audits.

In total 147 chain stores (Coles and Woolworths) and discount stores (Jewel, Franklins and Rainbow) were audited (106 in Victoria and 41 in New South Wales). The retail shop audits and in-depth interviews of key informants indicated few significant differences in matters such as product positioning, pricing and product range between supermarkets in Victoria and New South Wales.

Questionnaires together with a covering letter were mailed to 27 importers and distributors of South Asian culinary products. After two weeks follow-up telephone calls were made. The owners/managers of importing companies were either surveyed through in-depth face-to-face interviews or through telephone interviews. The survey generated 24 responses (88.8 per cent). The respondents to this survey identified themselves as being the Managing Director, Marketing Manager or Sales Manager within these companies. The job description of the respondents suggested that they would be appropriate persons to be interviewed for this study. Three importers did not participate in the survey as they were of the opinion the information being sought was of a confidential nature and the market too competitive for them to divulge the information being requested. The survey of importers provided information on:

in-store product positioning principal sales outlets/market segments experience in marketing South Asian foods product-market performance product-market share source of imports and level of imports reasons for selling these products level of product substitutability, and opportunities and threats to the product category The telephone survey of Food Service Outlets was targeted at 186 key informants in the selected establishments (owners and managers) throughout Australia and generated 141 interviews (75.8 per cent response rate). The respondents were either the owners or

20 managers of these establishments. Despite reminders and follow-up phone calls, 45 persons did not participate in this survey. In some cases the owners were abroad and others declined to participate for no obvious reasons. The survey of Food Service Outlets generated information on:

brand, pack size and weekly off-take of various product lines

level of use of Oriental or Western paste, sauces, chutney and pickles as substitute products

brand selection criteria

in-house preparation of curry sauces, curry pastes, chutneys and pickles

reasons for preparing these products in-house

level of acceptance of South Asian cuisine in Australia

perceived product market-share in the Food Service and the Supermarket segments

opportunities and threats to the product category

2.2 Market Characteristics and Trends

2.2.1 Sales Trends in Supermarkets

In 1997 the retail sales value of Indian foods in the supermarket segment increased to A$17 million, an increase of 13 per cent per year in the period 1993-1997 (Figure 2.1). Of this the study estimated that 65 per cent ($11.05 million) of the product category was made up of curry sauces, curry paste, chutney and pickles. In the report these product lines are described as South Asian culinary products. Patak’s and Sharwood’s with 61 per cent and 33 per cent of the brand category share respectively, are the dominant brands in the supermarket segment. Sales turnover in this category appears to be maturing. However, sales data in the Supermarket segment only represented sales of products purchased directly by individual outlets and excludes products drawn from the supermarket’s central warehouse..

Food manufacturers such as Master Foods, Crosse & Blackwell and Hall Brookes have extended their product lines of chutney and cooking sauces by introducing South Asian culinary varieties. Product-lines that are purchased by individual outlets directly from importers are categorised in the sales data as Indian Foods, Gourmet Foods or Asian Foods. The Patak’s and Sharwood’s products fall under this category. On the other hand, products from major manufacturers such as Master Foods, Crosse & Blackwell and Hall Brookes, drawn from the supermarket’s central warehouse, are positioned with mainstream culinary products and are not included with the sales data of South Asian culinary products. Product positioning strategies in the supermarket segment are shown in Figure 2.1.

21 Figure 2.1: Product Positioning in Supermarket Segment Delicatessen Gourmet Foods 4% 4%

Cooking Sauces 8%

Spices & Condiments Indian Foods 12% 60%

Asian Foods 12%

Decisions relating to product positioning and categorisation in the supermarket segment are the outcome of purchasing policies and product positioning strategies of the chain and discount stores themselves.

In order to allow for the expanding sales of product varieties from the major companies the study estimated a gradual expansion in the sales of South Asian culinary products by the major companies (Figure 2.2). It was estimated that sales of South Asian culinary products in the supermarket segment amounted to $18.9 million in 1997. Imported lines accounted for $17 million with products manufactured by large local manufacturers accounting for $1.9 million. The study suggested expansion in sales of South Asian culinary products by major companies has affected growth in the Patak’s and Sharwood’s brands which have matured.

The majority of chain stores stocked only Patak’s and Sharwood’s brands of South Asian culinary products. The range comprised three product-lines of pickles (mango, lime and tomato), four product-lines of chutney (various types of hot and sweet mango chutneys), ten product-lines of curry paste and fifteen product-lines of curry sauces. Patak’s mango pickles (sales off-take: 8 x 283 grams bottles/week/outlet) represented the best selling variety of pickle while Patak’s and Sharwood’s had equal market-share in mango chutney (12 x 354 grams bottles/week/outlet). In contrast, Patak’s had an overwhelming share of the market for curry paste (approximately 80 per cent), one of its leading product-lines (35 x 283 grams bottles/week/outlet). The best selling product variety was vindaloo curry paste.Curry sauces have been a new introduction and becopme the best selling product-line (63 x 283 grams bottles/week/outlet). Altogether there are about 20 varieties of curry sauces, the most important varieties being tikka masala, vindaloo and madras hot curry.

Discount stores stocked a larger number of brands although fewer product-lines. The additional brands these stores stocked included Maharaja’s Choice and Ashoka. Discount stores positioned South Asian culinary products either under Gourmet lines or

22 Asian Foods. Discount stores did not seem to have a product positioning strategy for South Asian culinary products.

The study suggests growth in sales of South Asian culinary products in the supermarket segment, although rapid, has been constrained by the incapacity of small-scale importers and distributors to support the cooperative advertising, promotion, and merchandising programs of chain stores and discount stores. At the time the field survey was completed in 1996-97 the main suppliers to the Supermarket Segment were Capital Foods (Ashoka Brand), Menora Gourmet (Ashoka Brand), Riviana Foods (Sharwood’s), and Mauri Grocery (Patak’s). Since then some changes to distribution arrangements have occurred.

Figure 2.2: Indian Foods - Sales Trends in Supermarkets 1993 - 1997 25

10 Sales ($ Million) 5

0 1993 1994 1995 1996 1997 Year Sales Estimated Sales

Source: Retail World (various issues); The Foodweek Industry Yearbook and Directory of Suppliers 1997; Australian Grocery Industry Marketing Guide 1997; Australian Food Marketing Centre (1998).

2.2.2 Brand Market-Share in Supermarkets

Nearly 95 per cent of South Asian culinary products that are sold in supermarkets are imported from the United Kingdom. Patak’s with 61 per cent market share and Sharwood’s with 33 per cent market share dominate the brand-market share in this segment (Figure 2.3). There are a number of other brands (Pasco, Simtom and Veeraswamy) that are also imported from the United Kingdom. Some stores such as Myers have introduced gourmet lines of South Asian cuisine that are manufactured by small-scale manufacturers (Mudgeeraba Spices and Curry Blends Condiments Pickle and Chutney and Warren Family) in Australia.

Figure 2.3: Trends in Brand Market Share, Supermarket Segment

(%) 30

0 Patak's Sharwood's Maharaja's Ashoka Others Choice Brand 1996 1997

2.2.3 Product-Lines – Supermarkets

Discussions with supermarket executives during the field study suggested the best selling product lines in the South Asian culinary range included cooking sauces (42 per cent), cooking pastes (40 per cent) and chutneys (15 per cent) (Figure 2.4). Most supermarkets do not stock Indian pickles. Curry sauces are a recent product innovation and have already become the most important product-line in the mainstream market. The popularity of curry sauces is attributed to ‘pour-over’ product attributes that adds time utility to the consumer. Trade sources point out these products are particularly popular for weekend or mid-week meals when there are increasing demands on the time of customers. Sales growth of Indian-type pickles in the supermarket segment (mainstream consumers) appears to be constrained by their traditional image, sour taste and acidic flavour. Consequently opportunities to develop markets for sweet pickles which provide consumers with a more contemporary range of flavours and imagery appear to be evident.

24 Figure 2.4: Product Mix - Foodservice, Supermarket and South Asian Stores

60 50 40 30 (%) 20 10 0

s ys kles Paste hutne Pic y C Curr Curry Sauces Product Line

Food Service Outlets Supermarkets South Asian Stores

2.2.4 Sales in Other Market Segments

The field study indicated that grocery stores owned by migrants from the Indian subcontinent (South Asian Stores) and Indian restaurants (Foodservice Outlets) are important markets for Indian foods. Based on in-depth interviews, experiential surveys and retail shop audits the study estimated that South Asian Stores account for 55 per cent and Food Service Outlets account for 25 per cent of product sales of Indian foods. Smaller quantities of South Asian culinary products are sold in Oriental Food Stores and Delicatessens. Product market shares in these market segments are shown in Figure 2.5.

25 Figure 2.5: Product Market Segments for South Asian Culinary Products in Australia

Delicatessens Oriential Food 1% Stores 1% Supermarkets 29%

Food Service Outlets 25% South Asian Stores 44%

2.2.5 Market Size

The field survey and data analysis suggest sales of South Asian culinary products in Australia are substantially greater than reflected from the scan data (Figure 2.2). The study estimated retail sales value of South Asian culinary products in Australia at A$37.8 million in 1997. Current information on market size is based on scan data and does not include information on sales through South Asian Stores, Food Service Outlets, Oriental Food Stores and Delicatessens. As explained in Section 2.2.7 on product segment share, South Asian Stores are the most important sales outlet for these products (44 per cent of sales). A large number of South Asian Stores are also importers, wholesalers and retailers of these products.

Import of these products are primarily derived from India, Pakistan, Sri Lanka and the United Kingdom. Table 2.1 summarises the information on imports of South Asian culinary product lines from the various countries.

Table 2.1: Major Sources of Imports, South Asian Culinary Products, Chutney and Pickles Product/Country England India Pakistan Sri Lanka South Africa Others*

Curry Paste 1-10 per cent 2 2 4 2 1 3 11-20 per cent - 1 1 - 1 1 21-30 per cent 1 1 1 1 - - 31-40 per cent ------41-50 per cent 1 - - 1 - - > 50 per cent 2 11 2 2 - 1

Curry Sauce 1-10 per cent 3 1 4 2 2 2 11-20 per cent - 3 2 1 - - 21-30 per cent 1 - - - - - 31-40 per cent ------41-50 per cent 1 - - 1 - - > 50 per cent 2 6 1 1 - -

Chutney 1-10 per cent 2 1 4 2 2 1 11-20 per cent - - 1 1 - 1 21-30 per cent - 2 1 - - - 31-40 per cent ------41-50 per cent 1 1 - 1 - - > 50 per cent 2 9 2 3 - -

Pickles 1-10 per cent 2 1 5 2 1 1 11-20 per cent - 2 1 1 1 - 21-30 per cent ------31-40 per cent ------41-50 per cent 1 1 - 1 - - > 50 per cent 2 10 2 3 - - * Malaysia, Fiji, South Pacific

27 2.2.6 Product and Brand Sales-Mix in South Asian Stores and Food Service Outlets

Product and brand sales-mix in South Asian Stores and Food Service Outlets are different to those in the Supermarket segment. As shown in Figure 2.4, there is considerable variability in product sales-mix within the three most important market segments. For example, pickles are the most important product line in South Asian Stores, accounting for 50 per cent of the product category sales while curry sauces represent less than 3 per cent of the product category sales in South Asian Stores. In the Supermarket segment, curry sauces are the most important product line and account for 45 per cent of product category sales, whereas pickles account for less than 3 per cent of product category sales. In the Food Service Outlets the most important product lines are pickles with about 45 per cent of product category sales and chutney with about 38 per cent of the product category sales.

The intensity in the use of these product lines in Food Service Outlets was determined by asking the respondents whether they purchased these product lines. Of the 141 Food Service Outlets surveyed 35.5 per cent (n=50) reported they used curry pastes, 71.6 per cent (n==101) reported they used chutneys and 75.9 per cent (n=107) reported they used pickles. None of the respondents reported use of curry sauces. Most Food Service Outlets prepare curry pastes in-house. The most common pack size in the Food Service segment was 5 kg plastic drums. 71 per cent of the respondents said they purchased chutney in 5 kg drums; 63 per cent of respondents reported they purchased curry paste in 5 kg drums and 49 per cent of the respondents reported they purchased pickles in 5 kg drums. Other pack sizes used in Food Service Outlets include 2 kg (4-7 per cent of respondents), 10 kg (1-4 per cent of respondents) and 40 kg (7 per cent of respondents).

Respondents were also asked to rank order on a scale of ‘1’ Most Important to ‘6’ Least Important, reasons for their brand choice decisions. The measurement items were as follows: price, quality, flavour, distributor’s service, product availability and other (a catch- all item to cover any other attributes the respondent might want to specify). The majority of respondents (78 per cent) ranked quality and flavour equally important and the most important criteria for decisions on brand choices. Discussions with the respondents further showed that they perceived flavour and quality to be similar attributes. On the basis of this finding it can be postulated that the dominance of different brands (Pachranga in Pickles and Ashoka in Curry Pastes and Chutneys) demonstrates that the quality/flavour of products under these brands match the market needs most closely.

2.2.7 Brand Market Share: Supermarkets, South Asian Stores & Food Service Segment

As discussed above, Patak’s and Sharwood’s have dominant market-shares in the supermarket segment. However, these brands represent less than 5 per cent of the brand market share in South Asian Stores and Food Service Outlets.

28 Brands from India, Pakistan and Sri Lanka dominate sales in South Asian Stores and Food Service Outlets. The survey identified more than 30 brands and about 24 importers of these products. Brand market shares for curry paste, chutneys and pickles in Food Service Outlets are set out in Figures 2.6, 2.7 and 2.8.

From Figure 2.6, it is apparent the most dominant brand of curry paste is Ashoka. This brand has 50 per cent share of the overall market for curry paste with significant brand market share in South Asian Stores and Food Service Outlets. However, the brand was not well represented in the Supermarket segment.

Figure 2.6: Curry Paste, Brand Market Share Others 18% Fern's 2% Sultan's Choice Ashoka 2% 50%

Patak's 6%

Maharaja’s Aeroplane Choice 10% 12%

Similarly, as shown in Figure 2.7 Ashoka and Maharaja’s Choice are the dominant brands of chutneys. This too is a result of the dominant position of these brands in South Asian Stores and Food Service Outlets.

29 Figure 2.7: Chutney, Brand Market Share

Sultan's Others Choice 13% 4% Fern's 4%

Ashoka Ahmed 50% 5%

Aeroplane 4% Maharaja’s Patak's Choice 9% 11%

In the case of pickles, Pachranga had more than 30 per cent market share having a large market share in Food Service Outlets. The second most important brand in this product line, Ashoka, had more than 20 per cent market share (Figure 2.8). Patak’s had only seven per cent market share and Sharwood’s was not represented at all in this product line.

Figure 2.8: Pickles, Brand Market Share

Others Bedekars 13% 6% Ahmed Pachranga 6% 30%

Fern's 8%

Ashoka Patak's 22% 7% Maharaja’s Choice 8%

30 2.2.8 Distribution

The study suggested a level of brand dominance in selected product lines (example, Pachranga in pickles and Ashoka in curry pastes and chutney) and that some distributors had significant presence in the Supermarket segment. However, trade in South Asian Culinary products was dominated by a multitude of small-scale companies with sales levels of $300,000-$650,000 per year for the range of products reviewed in the study. Only three companies reported sale levels in excess of $1.4 in these product lines.

Nineteen import respondents (with sales of $300,000-$650,000 in these product lines) to the survey reported they have been in this trade for at least 4 years. Seventeen importers reported their sales performance exceeded their forecast. The respondents were asked to select an appropriate answer to the following question:

In the period that you have been handling this product, which of the following statements best describes your evaluation of the market performance (Please tick as appropriate)

Poorer than originally forecast Similar to forecasted sales Exceeded sales forecast Substantially exceeded sales forecast

2.3 Specialist Food Suppliers

As ethnic food became popular specialist ethnic/imported food suppliers such as Riviana and Manassen developed sales of various imported culinary products into supermarkets and delicatessens. These companies are the leading suppliers of imported food products, including South Asian culinary products, to the supermarket segment. The survey suggested that, although there were 24 importers of South Asian culinary products, nearly 80 per cent of the sales to the supermarket segment were controlled by five importers.

2.4 Other Importers and Wholesalers

The survey identified 19 companies that imported South Asian culinary products and either sold these through their own retail outlets and/or through other South Asian Stores, Food Service Outlets and Oriental Stores. Migrants from the Indian subcontinent owned these companies. Two importers reported that they specialise in supplying Food Service Outlets. The names and contact details of these companies are provided in Appendix 2.1.

2.5 Consumer Market Characteristics

The study suggested the market for Indian condiments among mainstream Australian consumers is expanding and attributed the increase in product-market penetration to the following factors:

31 Increased exposure to Indian cuisine owing to the higher incidence of eating out, foreign travel and TV programs that demonstrate Indian cooking

Rapid expansion in the number of South Asian restaurants (because of growth in demand for Indian foods and the start-up of restaurants by new migrants)

Increasing demand for easy to use /quick to prepare products – attributes possessed by South Asian culinary products

Versatility of product-lines: increasing emphasis on various sauces both as a cooking ingredient as well as accompaniment

Popularity of home entertaining, especially barbecuing which has increased demand for South Asian cooking sauces

Increased concern about ‘healthy’ diet and the trend towards vegetarianism, and lower per capita consumption of red meats which seems to have increased the consumption of non-traditional foods

Packaging innovation and the introduction of products in different pack sizes and different mediums of packaging (glass bottles, plastic containers, cans, squeezable plastic bottles) which appears to have helped to meet the needs of different segments of the market. This seems to have increased product market penetration in several segments

Increasing demand for marinades because of:

participation in family cooking by males who, according to trade sources, tend to use meal enhancers such as marinades and cooking sauces more frequently than their female counterparts

double income families with higher disposable incomes and severe time constraints who have increased the demand for marinades, ready-to-cook meals and prepared condiments

development of multi-seasonal markets or de-seasonalisation of product lines. For example, barbecues are increasingly seen as an all season eating occasion

Market development activities, especially below-the-line campaigns and promotions (educational campaigns, recipe leaflets, in-store tasting) by manufacturers, which have increased consumer awareness of these products

Product - positioning strategies such as targeting these products at the mainstream pickle and chutney consumers rather than the smaller ethnic food segment

Increase in the single person household which has also increased the market for ready- to-cook but authentic - tasting products

Retail shop audit and analysis of demographic profile of suburbs in which supermarkets are located suggest the main purchasers of South Asian chutneys, cooking sauces and pastes are the higher income and middle aged group. This is probably due to this group being most inclined to entertain at home. Chutneys are used as an accompaniment or dip for barbecues. There may be opportunities to increase product market penetration amongst younger age groups because of their preparedness to experiment with non-traditional foods.

32 2.6 Shift in Principal Purchase Source by Ethnic Consumers

Trends in the food retail market in the UK suggest that, in the longer term, sales of these products through supermarket outlets will increase as second and third generation South Asian migrants shift their purchase from ethnic grocery store to supermarkets.

2.7 Processing Sector

There are a number of small to medium enterprises that manufacture South Asian Culinary products in Australia (Mudgeeraba Spices and Curry Blends, Condiments, Pickles and Chutney; Garnisha (Warren Family in Noosa). There could be interest among these manufacturers in increasing the scale of production by introducing commercial scale production.

2.8 Conclusions

The analysis of the market suggests consumption of curry sauce, curry pastes, chutney and pickles will expand further. From 1993-1997, the market for South Asian culinary products in the supermarket segment increased by 13 per cent per year. Both in terms of market size and market potential, Food Service Outlets and South Asian Stores offer considerable opportunities for market development and product market penetration. The market size for South Asian culinary products is about $38 million (at retail value).

Several developments have facilitated the growth in demand for this product category. These include increasing consumer affluence, greater knowledge about non-traditional foods, increasing demand for convenience foods and concerns about health. Consumer search for convenience should facilitate the market development for products such as ready meals, cooking sauces and pastes that offer a time and effort advantage over cooking ingredients such as spices. There is increasing consumer concern about the consumption of fat, sugar and salt and a growing preference for vegetarian and low fat foods. These developments in the market could provide opportunities for developing the markets for South Asian culinary products.

To assess potential opportunities and the strategies for setting-up a South Asian culinery industry in Australia, the researchers undertook a product market study in the United Kingdom, the largest international market for branded and packaged South Asian culinary products. They also conducted in-depth interviews and developed case studies on two UK based manufacturers and exporters of these products, Patak’s and Sharwood’s. Patak’s and Sharwood’s dominate the product category in the supermarket segment in Australia. The next chapter reviews the UK market for these products. In view of the cultural similarity and parallels in the grocery retail business they believed valuable insights can be obtained from an analysis of the UK market.

Appendix 2.1

Names of Importer and Distributors

Bharat Traders International Paras Ram Brothers Ltd Max Spices 580 Barkley Street 724 Curtin Avenue 11/28 Vore Street Footscray 3011 Eagle Farm 4009 Silverwater 2128

Capital Foods Pty Ltd Indo-Ceylon Spices Hindustan Imports Pty Ltd 28-32 Kintore Lane 4/55 Sinclair Road 48 Dingley Avenue Miles End 5031 Dandenong 3175 Dandenong 3175

Indian Emporium Riviana Foods Pty Ltd Food Delicacies 197B Brunswick Street 5 Corporate Avenue PO Box 477 Fitzroy 3065 Rowville 3178 Bankstown 2142 JK International Pty Ltd Global Foods Menora Gourmet Products 49 Suscatand 493 Albany Highway Pty Ltd Rocklea 4106 Victoria Park 6100 1695 Centre Road Springvale 3171 Worldwide Fine Foods Pty Ltd Basils Pty Ltd Manassen Foods 1 Pritchard Street 5 McIllwraith Avenue 95 Wetherill Street O’Connor 6163 Norman Park 4170 Silverwater 2128 Ostindo International Ltd Exclusive Food Houses Overseas Asian Stores Pty 10-12 Abbot Road 181 Chesterville Road Ltd Dandenong 3175 Moorabbin 3189 3/73 Main Road Clayton 3168 Ravi Imports Wiberg Australia Pty Ltd Prakash Export and Import PO Box 508 1-12 Asquith Street Pty Ltd Essendon 3040 Victoria Park 6100 3/700 Kingsway Gymea 2277 Island & Indian Traders Spencers General Foods Kumari Spices ‘N’ Things PO Box 786 4 Adams street 30 Helen Street Woodridge 4114 O’Connor 6163 Newstead 4006 Shan Imports Asian Bazaar Kohinoor Indian Centre Leybourne 11 Market Street 29 Lonsdale Street Chelmer 4068 Adelaide 5000 Braddon 2612

34 I S Wijetunge Products Raani’s Indian Shop Spices of Asia 20 Wilston Road 328 Gympie Road 355 Elizabeth Street Newmarket 4051 Strathpine 4500 North Hobart 7000 Asian Spices & Pickles Pty Ltd Dale’s Cajun Seasoning All India Foods 16 Market Street 7 Dungarvan Court 31 Balaclava Street Adelaide 5000 Waterford 6152 Woolloongabba 4102 Spices of the Orient Indian Spice Centre Spice Wholesalers 48 Buckingham Drive 6-7, 172 Glynburn Road Queensland Wanneroo 6065 Tranmere 5073 161 Payne Road The Gap 4061 Asian Products All Asian Food Market Asian Spice Distributors 67 Boland Street 9 Angus Crescent 18 Olender Street Launceston 7250 Yagoona 2199 Greystanes 2415 Blacktown Indian Spice Centre Fiji Market Continental Marketing 13 Donnellan Place 591 King Street PO Box 683 Blacktown 2148 Newtown 2042 Campsie 2194 Indian Spices Centre Karibu Cash & Carry Island Market & Spice 31 Ryedale Road 3/38 Tattersall Road Centre West Ryde 2114 Blacktown 2148 24 Station Street Marrickville 2204 Manny’s Indian Spice Centre Indian & Pacific Market Krishan Spice & Video 13 Ryedale Road 30b The Crescent Centre West Ryde 2114 Homebush 2140 71 Edgeworth Avenue Waitara 2077 Sandra’s Asian Spice Centre Spiceland Pty Ltd Mauri Food Division 1b Cowell Street 16 Henley Road 15 Grand Avenue Gladesville 2111 Homebush 2140 Camellia 2142 Spices of Asia Waters Trading Co Pty Ltd Sultans Choice Foods Pty 38 Forge Street 100 Belmore Street Ltd Lane Cove 2066 Meadowbank 2114 19e Gibbes Street Chatswood 2067 Usha Spicecentre Lee Mckeand & Son P/L H J Langdon & Co Pty Ltd 78 Station Road PO Box 328 PO Box 527 Wentworthville 2145 Prahran 3181 Footscray 3011 Fiji Products Import & Export Hoyt Food Manufacturing Spiceland 6/35 Aspen Street Ind P/L 545 High Street Moonee Ponds 3039 25 Alex Avenue Kew 3101 Moorabbin 3189

35 McCormick Foods Australia P/L Shan Imports MKS Enterprises 71 Fairbank Road 445b South Road Shop 5, 31 Pultney Road Clayton South 3169 Moorabbin 3189 Dandenong 3175 Paradise International Pty Ltd Ward Mckenzie Perfect Fine Food 222 Broadway Street Slough Road (Australia) Pty Ltd Reservoir 3073 Altona 3018 Factory 2, 3 Olive Grove Keysborough 3173 Pooja International Quality Spice Imports P/L 665 High Street 37 Buckley Street Thornbury 3071 Noble Park 3174

36 Chapter 3: Product Market Trends for South Asian Culinary Products in the United Kingdom Suku Bhaskaran, Susan March and Julie Verity

3.1 Introduction The following chapter will provide information on market trends for South Asian curry paste, curry sauce, chutney and pickles in the United Kingdom (UK). The UK is the largest market in the world for branded and packaged South Asian culiniary products. In the 1990s the demand for South Asian culiniary products in the UK expanded rapidly. Initially, demand was predominantly from the large Indian (616,000) and Pakistani (456,000) minorities in the UK. However, by the mid 1990s product penetration into the mainstream market had gained momentum.

3.2 Methodology

The chapter was principally completed through desktop research and in-depth unstructured face-to-face interviews of key informants in manufacturing companies, food distribution companies, food service outlets and grocery retailers. The field studies were primarily completed as an exploratory study and a convenience sample was used. The field studies incorporated in-depth research on the two largest manufacturers of branded and packaged South Asian culinary products in the world, Patak’s and Sharwood’s. Information on these two companies are provided as case studies: Patak’s (Chapter 4) and Sharwood’s (Chapter 5). The primary research in the UK and the two case studies in the UK were prepared by Julie Verity of the Cranfield School of Management and Susan March of Planning Solutions, Melbourne.

3.3 Market Overview

Demand for South Asian culinary products in the UK gained momentum in early 1990 (Mintel, 1997)1. In 1996 the retail sales value of South Asian culinary products was £310 milliom (48 per cent increase from 1990-1996). In real terms demand increased by 33 per cent. The product category includes ready meals (£201 million, the best selling product line), followed by cooking sauces (£58 million) and accompaniments such as breads, pickles, chutneys and pappadums (£40 million). Curry powders and pastes (£11 million) were also important product lines. Sales turnover for some high growth product lines in this category expanded substantially more rapidly than the average growth (estimated at 2 per cent) in the UK’s food industry. For example, between 1992 and 1996 sales of curry

1 Statistics and trends, unless otherwise credited, are taken from the Mintel report on Indian Foods - April 1997 and the Mintel report on the Catering Market for Cooking Sauces - October 1997. 1998 data, unless otherwise credited, is from A C Nielsen.

37 sauces increased by 72 per cent and the sales of South Asian ready meals increased by 51.1 per cent (Table 3.1). These sales do not include sales to restaurants and food service outlets. Restaurants and food service outlets are the most important markets for these products.

Table 3.1: Trends in Sales Turnover of South Asian Culinary Products, Retail Segment

Product Segment 1996 Sales Product-Lines 1992-1996 (£ million) (%) (% change) Ready meals (chilled, frozen and 201 64 +51.1 ambient) Cooking sauces 55 19 +72.0 Chutneys, pickles & accompaniments 40 13 +33.3 Curry powder and curry paste 11 4 +10.0 Total 307 100 +33.0

Discussions with key informants during the field study and information from various trade sources suggested that from its original position as a niche product targetted at the ethnic segment from the Indian sub-continent, South Asian culinary products have gained substantial acceptance in the mainstream market. The development of the market among maintream customers may be attributed to: increased consumer demands for ‘new’ flavours and food experiences increased exposure to South Asian cuisine in restaurants because of ¾ large number of restaurant ‘start-ups’ ¾ frequency of out-of-home eating ¾ consumer sophistication and readiness to experiment with new food varieties decreasing size of the family unit, making in-home meal preparation both more time consuming and less cost effective widening product offering such as curry sauces, fresh chilled and frozen meals, some of which even included traditional breads

In addition to these product market changes, other developments in the market have had significant ‘spillover’ effects in contributing to sales growth of this product category. These include: increasing per capita ownership of kitchen appliances such as freezers and microwaves which have increased demand and interest in experimenting with easy to prepare non-traditional foods.

38 growth in the number of women in the workforce and double income families. This trend has placed substantial demands on the time of women who are primarily responsible for in-home meal preparation and therefore the development has fostered growth in demand for easy to prepare meals. The introduction of easy to prepare product lines in South Asian cuisines has offered high income and variety-seeking consumers the opportunity to adapt to these foods. adaptability of South Asian culinary products to new food trends such as changing attitudes to health and food safety. For example, the popularity of poultry meat, increasing vegetarianism and the trend towards reduced fat consumption are all positive influences on this product category. acceptance of rice and ethnic breads (such as naan) as a nutritious meal accompaniment has encouraged the substitution of the traditional ‘meat and two veg’ meal in the mainstream market. introduction of a ‘new’ food culture through the large South Asian minority community in the UK: ¾ food habits moved from ethnic communities into restaurants and subsequently into the mainstream market ¾ ethnic consumers are also core purchasers of South Asian food products. The large South Asian minority in the UK has generated significant demand for these products product acceptance and popularity among the young has fostered a continous expansion of the market for these products demand among the affluent consumers has provided manufacturers with the opportunity to experiment with brand and product development strategies in a relatively price - inelastic market

3.4 Market Segments

3.4.1 Food Service Markets

The largest market for South Asian culinary products in the UK is the food service segment. This segment comprises the restaurant trade (estimated at £506 million) and other food service outlets (estimated at £619 million). Industry sources suggested that the food service segment (restaurants and other outlets) accounts for 78 per cent of the market for these products. Ready meals (estimated at £201 million), a rapidly growing segment, accounts for 14 per cent of the market. The retail segment (estimated at £109 million), only accounts for about 8 per cent of the market. The various market segments for South Asian culinary products in the UK are shown in Figure 3.1. There are more than 8,000 South Asian restaurants and take aways in the UK. By 1997 about 50 per cent of caterers in the mainstream market served South Asian foods such as Korma, Tikka Masala and Rogan Josh. South Asian cooking sauces are particularly popular

39 in the institutional catering market. Korma, Tikka Masala and Rogan Josh featured not only among the most popular dishes in the catering segment but are also three of the top five flavours of wet cooking sauce. Executives in Patak’s and Sharwood’s concurred with the observations of wholesale and retail company representatives that further growth in the product category will be an outcome of increased demand for processed products in the food service segment. The retail market, especially for some product lines, appears to be maturing. The field study suggested that trade rivalry and competition in the retail segment was intense. Many of the large retailers had introduced private label products.

Figure 3.1: Product Market Segments for South Asian Culinary Products in the UK, 1997

Retail Ready Meals 8% 14% Other Food Service 43%

Restaurants 35%

Source: Mintel Report (April 1997) Australian Food Marketing Centre (1998)

The research suggested that Patak’s and Sharwood’s, the brand leaders in the product category, have not made significant in roads into the food service segment. Patak’s serve the food service segment through CPC (now Best Foods) and Sharwood’s use Universe Foodservice. Some informants suggested that Sharwood’s would be appointing RHM Foodservice (a subsidiary of its parent company, Rank Hovis McDougall) to supply the food service segment. Trade representatives suggested, that both Patak’s and Sharwood’s are actively attempting to increase brand market penetration into the food service segment. According to Mintel (1997) the principal suppliers to the foodservice segment (55 per cent market share) are wholesalers. Other suppliers include Cash and Carrys (25 per cent market share), direct supplies by manufacturers (10 per cent market share) and grocery retailers (10 per cent market share). The market share of different intermediaries that supply the food service segment is shown in Figure 3.2.

40 Figure 3.2: South Asian Culinary Products, Source of Purchases by Food Service Outlets

Manufacturers Retailers 10% 10% Wholesalers 55%

Cash and Carry 25% Source: Mintel (1997) Australian Food Marketing Centre (1998)

3.5 Retail Markets

The 1998 sales turnover of curry paste, curry sauce, chutney and pickles in the retail segment was £112 million (6.8 per cent increase in value terms and 8.7 per cent in real terms). Patak’s (17 per cent market-share) and Sharwood’s (26.4 per cent market-share) are the brand leaders in this segment. Other important brands include Homepride (16.9 per cent) and Uncle Bens (7.2 per cent). Many retailers have introduced private label products in this category. Private labels account for 22.1 per cent of the product category sales in the retail segment (Figure 3.3).

Figure 3.3: Brand Market Share, South Asian Culinary Products in the UK (Retail Segment)

Private Labels Sharwood's 22.1% 26.4%

Uncle Bens 7.2% Patak's 17.0% Tilda 4% Others Homepride 6.4% 16.9%

Source: A.C. Nielsen (March 1998)

The product category comprises ten major product lines (Figure 3.4). Curry sauces, chutney, curry pastes and pickles account for about 66.8 per cent of sales in the product category to the retail segment. Curry sauce with about 54 per cent market share is the most important product-line. Curry sauces are retailed in two types of packaging: cans and glass bottles.

Figure 3.4: Product Line Market Share, Retail Segment (Total Market Value - £112 million) Pappadum Curry Paste 11.1% Pickle 4.8% 0.9%

Chutney Bottled Sauce 7.1% 38.9%

Accompaniment 4.8% Bread 10.9% Canned Sauce Curry Powder 15.1% 4.1% Dry Sauce 2.3% Source: A.C. Nielsen (March 1998)

Curry sauces are the most rapidly growing product line in the retail segment (Table 3.2). From 1992 to 1996 sales of curry sauces increased by 72 per cent, an average increase of 18 per cent per year. The rapid expansion of the market for curry sauces in the retail segment is attributed to: (a) Substitution of curry sauces for curry powders. This is attributed to consumer perception that curry sauces are more natural and wholesome than dried products. (b) Greater above the line marketing spending for wet curry sauces compared to dried products. New product line introductions include fresh chilled wet sauces. The increasing sales turnover of curry sauces disguises significant changes in the width and breadth of the product line, and the changing demands for flavours and packaging. For example, the sales off-take of canned curry sauces decreased by 12.2 per cent in value and 14.1 per cent in volume.

42 Table 3.2: Curry Paste, Curry Sauce, Chutney and Pickles, Retail Turnover

1996 Turnover 1992-1996 (£ million) (%change) Retail: Curry Sauces 55 +72 Chutneys and Pickles 7.3 +23 Curry Paste 5.8 +30 Catering:* Curry Sauces 4.0 +18 *supplying customers such as contract caterers, restaurants, pubs and clubs. Source: Mintel (1996)

The sales of various flavours of curry sauces in the retail market segment are shown in Table 3.3. Sales of standard curry sauces have decreased, whereas the sales of more exotic varieties have increased substantially reflecting the increasing sophistication of consumers in the mainstream market.

Table 3.3: Curry Sauces, Sales Trends of Product Varieties

Curry Sauces 1996 (£ million) 1994 – 1996 (%change) Standard curry 14 -12.5 Korma 9 +12.5 Tikka 9 +12.5 Rogan Josh 6 +20.0 Madras 4 no change Balti 4 +33.3 Jalfrezi 2 no change Other 7 +16.7 Source: Mintel (1997)

The market for canned sauces in 1998 was estimated at £17.5 million. Homepride with 67 per cent market-share is the brand leader in the canned sauces varieties (Figure 3.5). Other important brands are Patak’s (16.5 per cent) and Sharwood’s (12.3 per cent). It is estimated that between 1996-97 to 1997-98 sales of canned sauces decreased by more than 12 per cent (Nielsen, 1998). Trade sources reported that in 1996-97 the sales of Patak’s canned sauces decreased approximately 14.6 per cent the sales of Sharwood’s brand decreased by about 26.2 per cent. This is attributed to the substantial shift in demand from canned sauces to bottled sauces.

43 Figure 3.5: Retail Brand Market Share, Canned Sauces (Market Value - £17.5 million)

Private Label Sharwood's 3.4% 12.3% Other 0.8%

Patak's 16.5%

Homepride 67.0%

For curry sauces sales in glass bottles have increased substantially. In 1998 the market for sauces in glass bottles was estimated at £43.8 million. From 1996-97 to 1997-98 the retail sales value of this product line increased by 24 per cent (19.9 per cent in volume terms) with private labels dominating sales of this product line. Other important brands include Uncle Bens (16.2 per cent market share), Homepride (15.0 per cent market share) and Patak’s (12.4 per cent market-share). The market-share of various brands in this product- line are presented in Figure 3.6.

Patak’s enhanced their position in this product line through aggressive marketing and sales efforts. Trade sources reported that from 1996-97 to 1997-98 the Patak’s brand increased its market penetration by 46.5 per cent. However, trends indicated sales growth of this product-line would be less dramatic in the future with demand slowing in 1998.

Figure 3.6: Retail Brand Market Share, Bottled Curry Sauces (Market Value - £43.8 million)

Uncle Bens 16.2% Private Label 33.4% Tilda 10.1%

Homepride 15.0% Sharwood's Others Patak's 9.3% 3.6% 12.4%

Source: A.C. Nielsen (1998)

44 The sales value of curry pastes in the retail segment is estimated at £6.6 million. Patak’s (market share of 49.7 per cent) and Sharwood’s (31.8 per cent) are the two most important brands in this product line where branded products dominate the curry paste segment. Private labels accounted for only 16.8 per cent of the brand share in this product line (Figure 3.7) and seemed to indicate that pricing does not present a major influence over purchase decisions for curry sauces. Curry pastes are the second most rapidly growing product line in the South Asian culinary products range. Between 1992 to1996 sales increased by 30 per cent, an average increase of 7.5 per cent per year.

Figure 3.7: Retail Brand Market-Share, Curry Paste (Market Value - £6.6 million)

Others 1.7%

Sharwood's 31.8%

Patak's 49.7%

Private Labels 16.8% Source: A.C. Nielsen (1998)

In the early 1990s,the market for chutneys expanded and in 1997-98 sales of chutney in the retail segment were estimated at £8.6 million. More recently, the market seems to be declining. For example, in the period 1996-97 to 1997-98 the retail sales value of chutney decreased by 3.2 per cent (5.7 per cent in volume). Sharwood’s with 59.2 per cent market share remains the brand leader in the retail segment with the company’s Green Label Brand retaining 48.5 per cent market share in this product line in 1997-98 (Figure 3.8).

Figure 3.8: Retail Brand Market Share, Chutney (Market Value - £8.6 million)

Sharwood's Other 10.7% Sharwood's Green Label Private Labels 48.5% 29.1%

Others 4.9% Patak's 6.8% Source: A.C. Nielsen (1998)

The sales value for South Asian varieties of pickles in the retail segment is relatively small and in 1998 were estimated at only £1.6 million. From 1996-97 to 1997-98, the retail sales value for this product line decreased by 9.5 per cent (14.6 per cent in volume). Patak’s (67.2 per cent) and Sharwood’s (32.7 per cent) remain the only two brands in the retail segment with trade sources suggesting Patak’s gaining relative market share.

3.6 Manufacturers

The manufacturers of South Asian culinary products can be categorised into: • Ethnic Product Specialists such as Patak’s and Sharwood’s who market their product as being ‘authentic’ indigenious products • Mainstream Manufacturers such as Campbell Foods (Homepride) that tend to Westernise traditional recipes (example: Bernard Matthews Wafer Thin Turkey Tikka Masala) • Contract Manufacturers that manufacture private label products for the major retailers. Mainstream manufacturers and retailers have concentrated on ready meals and cooking sauces. These companies do not manufacture product lines such as pickles and pastes.

46 On the basis of sales turnover to the retail segment the most important manufacturers of South Asian culinary products are Sharwood’s, Campbell Foods and Patak’s. Among these companies, Patak’s have recorded the most rapid rates of market growth (Table 3.4). Market reports (Mintel, 1998) suggest that consumers value authenticity in their choice of South Asian culinary products and prefer to purchase brands with a strong ethnic image. The word ‘authentic’ was the thrust of Patak’s market positioning and product introduction strategy. The word, however, should be understood as referring to UK restaurant standard, which, Sharwood’s pointed out insistently, was not the same as the food attributes in the Indian sub-continent. Several reports in the trade and consumer press have indicated that Tikka Masala as the British know and love it would be unrecognisable as such in India. The dish in India is dry but has been adapted to the British taste by making it more creamy and wet. Patak’s marketing team perceive Sharwood’s brands to be less ‘authentic’ than their own brand and that of the new player, Tilda. Further analysis of Sharwood’s and Patak’s, contrasting their origins, cultures and strategies, are elaborated in the detailed case studies (Chapter 4 and 5).

Table 3.4: Major Manufacturers - Product Category Sales, Market Share and Sales Trend

Manufacturers Sales Market Share Change (1996 - £ million)2 (%) 1994-96 (%) Sharwood’s 28 26 +2 Campbell Foods (Homepride) 21 19 -2 Patak’s 14 13 +5 Master Foods (Uncle Ben’s) 8 7 +1 Van den Bergh Foods 4 4 -1 Contract Manufacturers (Private 16 15 +5 Labels) Other Brands 18 17 -7 Source: Mintel (1998)

Some trade informants estimated Sharwood’s 1996 sales of South Asian culinary products in the UK (Sharwood’s also export these products) to be between £25 million to £30 million while Patak’s were reported to sell around £10million-£15million in the UK market. Patak’s too have developed large export sales. The Nielsen data in Table 3.5, made available by Patak’s during the field studies, provide a comparison of the 1997 and 1998 sales by Patak’s and Sharwood’s. The data suggests that Patak’s sales have increased while Sharwood’s have decreased with the combined sales from the two companies increasing from £45.5 million in 1996-97 to £46.4 million in 1997-98 (an increase of nearly 2 per cent).

2 Excludes ready meals

47 Table 3.5: Patak’s and Sharwood’s UK Business in South Asian, Accompaniments and Ingredients, 1997 and 1998

Company Sales to Retail Segment (£ million) June 1997 June 1998 Change (%) Sharwood’s 29.0 m 28.4 -2.2 Patak’s 16.5 m 18.0 +9.3 Source: Nielsen

Product and price lists (as at June 1998) for Sharwood’s and Patak’s are shown in the appendices to the respective case studies. The 1997 prices as reported in the May 3, 1997 Supplement to The Grocer are also contained in the case studies. Information on the product and price lists show both companies have a wide product offering – Patak’s: 87 and Sharwood’s: 72. Many of these products such as ethnic breads, ready-to-eat meals, dhals, snacks and soups are outside the scope of the present study. The principal product lines offered by Patak’s and Sharwood’s to the retail segment of the UK market that fall within the scope of this study are shown in Table 3.6. Patak’s typically offer a case lot of 6 units whereas Sharwood’s offers a case lot of 12 units. To some extent this reflects Patak’s strength in the smaller independent store sector while Sharwood’s focus on the retail multiples. Patak’s strength in the restaurant sector is reflected in offerings such as mini pots of pickles and chutneys that can be placed directly on the table, reinforcing the Patak’s brand among restaurant-goers. Both Patak’s and Sharwood’s offer a range of flavours to appeal to mainstream conservative tastes (eg Korma) as well as the more adventurous consumers (eg Dhansak). The best selling product lines are packaged in larger sizes by Patak’s to appeal to the mid-week family meal segment, whilst the more leading-edge flavours come in smaller jars for the weekend treat segment. Sharwood’s groups its offerings into ranges, for example, Balti Stir Fry Sauces and the new Tenghai Indian Cooking Sauces all in jars. Mini jars of cooking sauces are offered by Sharwood’s to cater for the singles market and to encourage trial purchases. Patak’s offers variety packs of pastes, pickles and even ready meals. Analysis of wholesale and recommended retail prices for 1998 demonstrate that Sharwood’s command premium prices in most product lines reviewed. In the canned sauces range, Patak’s is more expensive and in the case of the more adventurous flavours in glass jars, there is little difference in the prices between the two companies.

48 Table 3.6: Wholesale Price Comparison for Selected Product Lines: Sharwood’s and Patak’s

Product-Line Wholesale Price Recommended Retail Price Weight Units Price Price/uni Price/g Price Price/g t G £ £ £ £ £ Sauce – Canned e.g. Korma Sharwood’s 365 12 8.5 0.71 0.0019 0.85 0.0023 Patak’s 283 6 3.87 0.65 0.0023 0.82 0.0029 Sauce – Glass Jar e.g. Korma Sharwood’s 435 12 13.5 1.13 0.0026 1.35 0.0031 Patak’s 540 6 7.38 1.23 0.0023 1.49 0.0028 Sauce – Glass Jar e.g. Dhansak Sharwood’s 445 12 13.5 1.13 0.0025 1.35 0.0030 Patak’s 425 6 6.39 1.07 0.0025 1.33 0.0031 Paste e.g. Tikka Sharwood’s 285 12 14.5 1.21 0.0042 1.45 0.0051 Patak’s 300 6 6.57 1.10 0.0037 1.47 0.0049 Chutney – Green Label/ Major Grey Sharwood’s 360 12 13.5 1.13 0.0031 1.35 0.0038 Patak’s 340 6 6.25 1.04 0.0031 1.27 0.0037 Pickles – e.g. Lime Sharwood’s 200 12 11.9 0.99 0.0050 1.19 0.0060 Patak’s 283 6 7.28 1.21 0.0043 1.47 0.0052 Source: Patak’s and Sharwood’s June 1998 Price Lists

49 Table 3.7: Prices on Sainsbury’s Shelves, 15.7.98

Brands Wet Dry Chutneys and Curry Curry cooking cooking pickles pastes powders sauces sauces Sharwood’s £1.35 - £1.39 – 360g £1.45 - 285g Jar 440g Jar Jar 3 flavours 85p - 445g Lime pickle at Jar of new £1.22 – 200g mild … 85p – Tin Patak's £1.49 – £1.35 – 340g £1.55 - (70 Products) 540g Jar Jar 290g Jar 2 flavours £1.55 - 283g Jar £1.45 - 285g Jar Homepride £1.35 – 460g Jar 99p – Tin Master Foods £1.45 – 500g Jar Sainsbury £1.29 – 85p - 315g Jar £1.05 - 500g Jar 5 flavours 200g Jar 99p – Tin Source: Australian Food Marketing Centre (1998)

3.7 Margins and Competition

Information relating to profit margins in this sector were difficult to obtain. Margins of profit are dependent upon brand positioning, product sales-mix, depth and breadth of product lines, expenses on promotional support and the level of competition in the product category. A 1996 forum at Templeton College (Oxford) for food retailers and manufacturers stated the average ex-factory net margin in the industry was approximately 12 per cent. The 1997 Annual Report of Rank Hovis McDougall (RHM) shows a net operating profit of 9.3 per cent for the food division. RHM manufactures an extensive range of food products (bakery products, stuffings, conserves, salt). Several of these products are low margin categories. It is highly likely that the Sharwood’s range would be among the higher margin products for RHM and that these lines would contribute to increasing the average margins in the food division.

50 Hazlewood Foods, the largest manufacturer of private label cooking sauces including South Asian sauces in the UK, reported an operating margin of 5 per cent in both 1995 and 1996. Because Hazlewood Foods contract packs a large range of products (chutneys, pickles, bakery lines and mineral water) it is difficult to estimate the margins on South Asian sauces. Another contract manufacturer, Hillsdown Holdings, also reported margins of 5 per cent for its grocery lines in 1995. Executives in Patak’s emphasised that the company was able to maintain its margins and that pricing was not a key issue in developing the market for their products. Patak’s reported that they could maintain margins through improving their core and augmented product offerings. Patak’s offered recipe information on their packs, had an extensive range of product lines and undertook extensive promotional activities to develop the brand image. Research discussions suggested that Patak’s net operating margin would be between 7 per cent and 14 per cent. Executives in Sharwood’s did not agree that the product category was very profitable. Elaine Underwood said: The companies that are in the sector are definitely making money and overall the market is in growth. But, the level of competition is increasing and it is not over-priced. The consumer still finds this a value-for-money category. Information from key informants in the industry suggested that net operating margins for cook-in-sauces, pickles and condiments ranged from 5 per cent to 15 per cent with t brand leaders in the categoryable to earn operating margins of about 22 per cent.

3.8 Advertising

Both Sharwood’s and Patak’s invest in advertising new products and their companies. Table 3.8 shows the advertising expenditure by the two companies:

Table 3.8: Comparason of Advertising Expenditure – Patak’s and Sharwood’s

1994 1995 1996 1997 1998 Sharwood’s £1.2m £1.4m £1.1m N.A. N.A. Patak’s £0.5m £0.6m £0.8m N.A. £1m

During 1995,Sharwood’s ran advertising campaigns for its Balti Stir Fry sauces and its Ready-to-Eat pappadums. At the end of 1996 the company introduced its first corporate advertising campaign with a commercial that did not focus on individual products, but instead used images to contrast the traditional Far East with the vibrant new economies of today. This advertisement highlighted the fact that half the world’s population lives in the Far East with the strapline: It’s half the world. It’s Sharwood’s. Patak’s TV advertising for 1998 is designed to support its new labels and strengthen its authentic position as an Indian food company. Its strapline is: Share Patak’s passion for India.

51 Retailers control the type and timing of branded manufacturers’ promotions. The senior trade marketer at Patak’s said: We have to do more promotions of the buy-one-get-one-free sort, the retailer dictates this. They do not want the 20p off one line every month. They tend to give you your slot and rotate the promotions around the brand names. So we have lost the opportunity to do small promotions every other month and now get 2 or 3 slots a year to do a bold, big promotion on the category. They cost a lot of money - but we have to do them to keep our shelf space. Patak’s also run promotions with ethnic wholesalers through their key account managers and consumer promotions aimed at customer loyalty, consumer education and increasing frequency of purchase. These include their recipe club and recipe calendar, together with money - off vouchers to be used each month.

3.9 Conclusions

Between 1993 and 1997, the market for South Asian culinary products in the UK increased by 24 per cent (Mintel, 1997). By the year 2001 the market is forecast to expand to £430 million (£380 million in real terms), a growth of 15 per cent. It is forecast that the product category will mature owing to increased competition from Thai, Japanese, Mexican and Caribbean culinary products. To date, increased demand has been the outcome of the introduction of value-added products (either as ‘new’ products incorporating a mix of Indian and Western tastes) or the move towards authenticity. This is epitomised by the shift from powders to pastes, the growth of chilled ready meals and the increase of regional recipes in the wet sauce market. Market characteristics that encouraged growth in the product category in the early 1990s are expected to continue. Trade sources suggest there are further opportunities to increase product market penetration. These include product introduction into new consumer market segments through activities such as sampling, cross promotions and recipe provisions, and the sponsoring of television cookery programmes or books. Opportunities to increase product penetration in existing segments were also canvassed by some informants. For example, industry reports, including the Mintel study, suggest only 45 per cent of the consumers of South Asian foods prepare these foods at least once a month at home. Fifty- five per cent of the consumers were classed as being infrequent, that is, opportunities exist to increase the frequency of consumption in this group through promotional activities such as ‘money-off’ vouchers, loyalty schemes and consumer education.

Within the retail sector there are still opportunities for growth in sauces and some accompaniments. Both Sharwood’s and Patak’s, however, believed there would be rationalisation of the number of brands on supermarket shelves. It appears that Patak’s could retain listings in areas where they are still growing - at Sharwood’s expense while Patak’s could lose their listing to Sharwood’s on chutneys in some stores. Two factors above all others were singled out by Mintel as influencing consumer choice in foods in the medium to long term: convenience and health. Convenience favours foods such as ready meals, cooking sauces and pastes, which have a time and effort advantage over,

52 say, spices. Greater convenience can be achieved with features such as shorter cooking times, microwaveable foods, meals incorporating accompaniments, and longer shelf life products. From the healthy diet viewpoint fat, sugar and salt consumption remain of primary concern. Vegetarian foods and low fat or low calorie products are expected to increase their share of the market in the medium to long term. All these factors can be incorporated into Indian foods and manufacturers who can maximise this advantage and communicate it to the consumer are expected to gain competitive advantage. Both companies are focusing on NPD in the sauces and snacks areas and on increasing their ranges in convenience offerings. This is likely to mean new presentations and packaging for existing products or ready-to-eat foods (in combination with user friendly packaging). Both Sharwood’s and Patak’s are also focusing on the foodservice sector, which shows exciting potential for growth. Developing markets abroad must also be a priority for both companies. The race to get a foothold in North America has already started, with Patak’s showing the greater intuition for managing overseas joint ventures and distributorships.

53 Chapter 4: Case Study, Patak’s (Spices) Ltd - The Rising Star Susan March and Julie Verity

The True Taste of India Indian food is an amalgamation of the cuisines of the many diverse cultures and geographic regions within India. What characterises and unifies all Indian cooking is its inspired use of aromatic herbs, spices and local produce.

Patak’s expert knowledge of how to blend spices and herbs together to enhance the flavours, aroma and colour of a dish, is the secret to the art of creating truly authentic Indian cuisine. [from: Patak’s advertising]

In 1993, Patak’s, the authentic Indian food company, outstripped all its competitors in the Nielsen/Marketing survey of the UK’s Top 20 Fastest Growing Grocery Brands. That year Nielsen (the market research company) recorded Patak’s growth at 93 per cent! The following year, Patak’s came-in second in the food category of the same survey, with 46 per cent growth. In 1995 and 1996, Nielsen placed the Patak brand in third and eigth place in the food rankings, with growth rates of 26 per cent and 33 per cent respectively. At the time of writing, the 1997 results were keenly awaited by all those at the Haydock Head Office in the North West of England.

Table 4.1: Fastest Growing Brands of Food Products in the UK, 1993 - 1996 Year Overall Rank Food Category Rank Growth* 1993 1st 1st 93% 1994 10th 2nd 46% 1995 14th 3rd 26% 1996 12th 8th 33% *growth is measured in year-on-year percentage increase in value of sales Source: Nielsen survey

What Patak management did know, from their own research, was that they now held about 17 per cent of the £112m UK Indian food market3, a market which had grown between 8-12 per cent in the last year (to June 1998). This placed the Patak brand second to the market

3 The market is defined as the consumer market - brands sold on the food fixtures in retailers’ stores. Products include: Powders, Pastes, Breads, Accompaniments, Chutney, Pickles, Pappadums and Sauce-in-Glass.

54 leader - Sharwood’s (26.4 per cent) and for the first time, marginally above the mainstream brand, Homepride (16.9 per cent). The year-on-year analysis showed that Patak’s and Tilda (a new authentic brand into the market) were the only two brands to experience growth; that Patak’s growth was double the natural market growth; that Sharwood’s share had declined 4 per cent; and, that retailer’s own label products sustained impressive growth of 32 per cent, taking these labels to a combined market share of just over 22 per cent. The years between 1993 and 1997 had been spectacular for Patak’s. Management claimed their volume growth accounted for 60 per cent of the total market (between 1992 and 1996 Mintel recorded total growth at approximately 70 per cent - from £76m to £109m) and that the brand had increased its worth to more than the estimated £21m quoted by The Grocer, in January 1997. In 1991, the brand’s market share had been a lowly 2 per cent compared with the long-term market leader, Sharwood’s, which commanded a very healthy 50 per cent - or more, depending on how the market was defined. The 1990s had seen the Patak brand rise to the point of becoming the serious challenger to the long-established dominant player - Sharwood’s. Indeed, in some categories Patak’s was already the star4, with perhaps the greatest potential threat coming not from the traditional brand leader, but from the retailers and their persistent and consistent drive to dominate their own shelf space. As with other food categories, the race to be the number one consumer brand, in order to guarantee a place on the retailers, list of stocked items, was well worth winning. And in the middle of 1998, it looked as if Patak’s was the name most likely to succeed.

4.1 Authentic Origins

Mr and Mrs L. G. Pathak left Uganda in 1957. With very little money and barely a word of English between them, the family settled in London. The only employment Mr Pathak could find at that time was as a road sweeper for the local borough council. According to the story it was Mrs Pathak who thought it would be a better idea to try to use their native skills and make Samosas, selling them to the local Indian community. At first the family kitchen was the only capital asset the business had. Samosas were delivered to customers by the young Pathaks, who found their way about London by showing people the address they needed to find, written on pieces of paper and watching the instructions they were given. They also carried their home address on paper in case they got lost on the way back! Based on the initial success with Samosas Mr Pathak set up shop in Drummond Street, NW1 and started importing spices and raw materials from India. In 1962 the family bought a converted mill in Northamptonshire and ran the expanding business from there. In 1965 the product range grew to include pickles, chutneys and curry pastes. It was in 1970 that Kirit Pathak (the current Chairman) was summoned early from University to help in his father’s business. A year later, Idi Amin ‘cleansed’ Uganda of Asians5 and many of them arrived in the UK, seeking new homes and new jobs. The British government selected various Asian families who lived successfully in the UK to help groups of new immigrants.

4 Data used is Nielsen March 1998 as provided by Patak’s. June 1998 data from the same source was provided by Sharwood’s for that case and paints a slightly different picture. It should be noted that quarterly data is volatile due to the effect of promotions during the period. 5 Asians in this context refer to immigrants mainly from the Indian sub-continent

55 Among those selected were the Pathaks. This helped the company grow in two respects. First, demand for Indian food increased per se. Second, through the direct links the Pathak family built with many of the new immigrant communities Patak was established as the authentic ethnic brand. Today the company claims that 90 per cent of Indian restaurants in the UK use one or more of its products. In 1976 Kirit married Meena. Meena was educated at the Sofia College of Food Technology in Bombay and had worked as a development chef for one of the prestigious Indian Hotel Groups. The story tells how she did not take kindly to having her marriage arranged, so she planned to make Kirit find her unattractive at their first meeting. Things cannot have gone according to plan, however, since the very next day they announced their engagement and have been happily together ever since. Meena’s culinary skills became important new capabilities for the business. She had an excellent understanding of Indian food, and took over blending the spices to meet her own very exacting tastes and standards as well as developing new recipes and ideas. Today she has the role of Development Director and, along with Kirit, shares the secret of all of Patak’s spice mixes and recipes. Nobody else at Patak’s is allowed into these closely guarded secrets. Production moved to a newly acquired factory in Wigan in 1978. Apparently the air in the North-West has a superior quality when it comes to storing spices. It was from this facility that the business grew gradually during the 1980s, especially with the ethnic distributors to Indian restaurants and independent ethnic retailers. It was not until the late 1980s that the potential for sales to non-Asians, through the ever-dominating UK grocery multiples, was perceived as a real opportunity by Kirit. Having recognised the potential, he also saw the need to change the company fundamentally. He took more control of the business, eventually buying out his siblings and recruiting a management team that could develop the non-Asian consumer business.

4.2 Key Ingredients for Success

In 1991, Kirit and his new Managing Director (David Page, recruited from Campbells) set a vision for Patak’s: to be the biggest Indian food ingredients supplier in the world. He recruited a marketing team, a sales force which could build the brand’s presence on the retailers’ shelves and finance people who could keep a track on the company’s growth. A rough estimate of Patak’s turnover at that time was put at £4-5m with the majority of the business based in the UK and a significant share of that going to the ethnic wholesalers who sold-on to Indian restaurants and independent retailers. A Nielsen report of the time, estimated that 17 per cent of Patak’s grocery sales went via the independents, compared with only 3 per cent of Sharwood’s grocery sales. Those familiar with the industry were generally dismissive of market research data in this sector: Our [Patak’s] strength was in the ethnic sector, restaurants, independent ethnic stores, around Southall, Leicester, Wolverhampton, Birmingham and Bradford. There are probably something like 10,000 independents in this country and Nielsen survey 70! We think our market share is under quoted because of their poor coverage in this sector of the market and, at that time, if you

56 wanted authentic Indian ingredients, you had to shop in this sector. Consumers’ knowledge about the cuisine outside of the Asian community was not well developed then. In the independent sector (1998) we have something like twice our natural market share. In the ethnic trade we have 3-4 times our natural market share.

The focus for Patak’s marketing activity was authenticity, the aim was to build the perception that Patak’s was the most authentic brand. The advertising slogan used in the first TV campaign launched regionally in the UK was: Pukka People Pick a Pot of Patak’s. To strengthen the message, the company dropped all those products from the portfolio which were not Indian and increased its range, largely matching what the market leader – Sharwood’s - offered at that time in terms of lines, but at a slightly lower price point. Even at this time, the Patak’s range was slightly more adventurous than that of the competition. Sweet mango chutney, for example was a standard, but Patak’s added Major Grey and Sweet Chunda mango chutneys as well as combinations with lime. In addition to mild and extra hot curry pastes there were regional products such as Kashmir Masala, Hot and Mild pastes. By 1994 Patak’s had stopped following in Sharwood’s footsteps and started creating innovative new products for the market. In the four years up to 1997 over 90 new products were launched, fuelling their own spectacular growth and that of the Indian food market overall. During these years the quality and creativity introduced to the brand remained true to the ‘authentic’ core value. Quality ingredients were used and processes designed against criteria of taste rather than cost. Kirit retained his role as the primary buyer, spending up to three months a year in India searching for suppliers of spices and other raw ingredients like mangoes and limes. Typically he would choose raw materials from the field in order to get control over final quality. Some products were semi-processed in India and shipped to the UK, mangoes for example, especially where commodities like salt and sugar were added in quantity. These items were significantly cheaper in India than in the UK. The majority, however, were imported and processed in the UK under the watchful eye of Meena. we purposefully add value in the sifting, drying, roasting and blending of the spices, cost is not our first focus. Said one of the management team at Patak’s. Out of season, raw ingredients were sourced from elsewhere, South America for example. Patak’s give an indication of the importance they place on fresh spices in this extract from Spicebox (Issue No 2. - Patak’s promotional material) in reply to a consumer’s letter:-

Dear Mrs Rutherford

Thank you very much for your letter. In answer to your query, we use absolutely fresh spices in our products which are imported in whole form and ground in our factories in the UK. As soon as these are ground, they are blended together in the right proportions as per the requirement of that particular curry and then immediately encapsulated in oil. This retains their flavour.

57 The spices generally used by the public are imported in their powdered form and it has usually taken about one year for them to get from the field to the shelf during which time they can deteriorate in both flavour and colour.

Yours sincerely

The Spicemaster

Patak’s management and industry researchers (like Nielsen and Mintel), place the company’s ability to innovate and develop new products high on their lists of explanations for the company’s success during the 1990s. Management claims that the company was the first to market with Balti and that they invented Indian pastes. Mintel attribute much of this to Patak’s close association with the Indian restaurant sector, providing them with a unique insight into Indian food trends as they happen. Meena’s closeness to the recipes and cooking techniques back home and her attention to spice blending are also presented as reasons for the products’ distinctive and authentic tastes. Certainly the range itself was leading-edge, with Makhanwala and Patia added to the sauce portfolio in 1995, which already included Jalfrezi and Dopiaza flavours. During the first few months of 1996 Patak’s ran its first ever national advertising campaign. The 30 and 10 second advertisements were filmed in India and directed by a leading Hollywood director, Rolland Joffe. The message of the commercial was the brand’s expertise in authentic Indian food. Money spent on the campaign was reported at £1m. It was shown on Channel 4 and Sky TV. Brand communications were supported with trade print advertisements, which reiterated the quality, authenticity and extent of the Patak range. Early in 1997 the company spent about £0.25m on what the media reported as Patak’s most significant brand redesign since the company began operating 40 years ago. The packaging and presentation of the entire range was rejuvenated with the intention of strengthening brand identity and generating interest in the category itself. The marketing director explained: What is powerful about India - in the consumer’s mind - is the colour, spices, culture, festivals, happy faces. It is thought of as a vibrant nation. We wanted to imitate this on our jars and speak about our authenticity to the consumer. As a result, the consumer’s awareness of the brand and advertising doubled in the five years between 1993 and 1998.

4.3 Authentic and Accessible

It was also in 1997 that the brand moved subtly toward the ‘mainstream’ positioning of Sharwood’s, Uncle Bens and own label products. The Grocer (Jan 1997) reported: Patak’s has plans to extend out of the ethnic fixture to mainstream sauces with its latest launch of cooking products in larger glass jars. Phil Lynas, Patak’s marketing director said; ‘We entered the market three years ago and aimed at the more adventurous and premium end. We’ve established quite a good position, but identified a gap for more mainstream flavours in jars’. There are five varieties in the range, Korma, Tikka Masala, Rogan Josh, Balti and Madras. Lynas says the consumer research identified two areas of opportunity.

58 ‘Consumers wanted different mainstream flavours for middle-of-the-week meals for all the family, at weekends some people like to replicate the Indian restaurant experience and are looking for something a bit different’. The gamble was that the brand would move too far from its long-term position the premium, ‘authentic’ end of the market and become associated with the mainstream food brands like Uncle Bens and Homepride, plus the retailers’ own labels. The prize that Patak’s were hoping for with this movement toward more accessible products however, was not only volume growth, by appealing to mainstream tastes, but growth in the authentic sector as the more adventurous traded up to the ethnic shelves close by: We want to remain the authentic brand, offering expertise, without reducing accessibility. Said Lynas in The Grocer. ‘But at the same time, we also want to offer consumers a family size jar providing four servings, which sets us apart from other brands offering only two or three servings.

Competitor Prices of Mainstream Sauce-in-Glass Products - Retailer Shelf-Edge Prices (July 1998)

Patak’s Sharwood’s Homepride Uncle Bens Sainsbury own label 540g £1.49 440g £1.35 460g £1.35 500g £1.45 500g £1.29

Patak’s understanding of the UK consumer was gained from having been involved with the ethnic trade over forty years. They probably had an intuitive feel for the consumer that other competitors would have had to pay researchers to find out. Originally, the non-Asian consumer discovered Indian food by ‘going for a curry’ at an Indian restaurant or ordering a take-away. Late in the 1960s, there were between 500 and 1,000 curry houses in the UK, a number which grew substantially during the 1970s with the rise of immigration to the UK. Today Mintel estimates the number to be 8,300, serving eat-in and take-away meals worth about £1.6 billion. The most popular dishes are Chicken Tikka Masala and Chicken Korma. Other regular choices are Rogan Josh, Jalfrezi and various Masala curries. The culture around eating Indian food out in the UK was a male one, based originally on the habit of going for a curry after an evening in the pub with the lads. This has translated to home preparation, where men feel as confident about making a curry as women do.

59 , n o l Consumer Tastes ti e a v c ra u t and Influences d n e i e r s re a e tu re e g c c g d fa in d Patia le u , e w n s g o a e in Makhani n d k /m m a r r m le e le a Makhanwala m i r u a g s t o Karai n re r o , p c s it ry g s e in i k s v a t o e n o Jalfrezi r a c s c r n u in u i o ta h r Pasanda s t tu e w n r o e : r v s g d e a Dopiaza c n e Dhansak lu f in

core restaurant favourites: Korma, Balti, Tikka Masala, Madras, Rogan Josh

Consumer knowledge about Indian food, therefore, was driven originally by the restaurants, and the ‘authentic’ standard related to the tastes consumers first learnt there. This, however, was changing in Phil Lynas’ mind. Today, more people are likely to have bought Indian food from a supermarket - the trend has been toward making food at home. Mintel research conducted in October 1996 showed that 27 per cent of those sampled in the UK ate an Indian meal at least once a month. Thirty-two percent of the sample population said they did not like Indian food and 28 per cent said they would prefer to eat Indian at the local curry house or as a take-away. Those purporting not to like the cuisine were likely to be older (above 55 years). Those under 45 years were more likely to make food at home, to be living near to London, the Midlands or Anglia (near to large ethnic populations) and were likely to be among the better off. Phil Lynas said: As consumers learn about the cuisine, they seek more authenticity. The vast majority of people will buy mainstream products, but we think the authentic end is driving the growth of the market and - literally - feeding and leading the opinion formers. As people travel more, they will become better educated about Indian food - which is complex and badly understood at the moment. We need to educate them as well and capture some of those that say they don’t like Indian food - because the chance is very high that they have never actually eaten it! Patak’s promotional material has a strong focus on consumer education, for example about the regional cuisines of India. See Appendix 4.1 and 4.2. Habits among the local Indian community were also changing. Whereas first and perhaps second generation UK Asians would shop regularly at the independent ethnic store, increasingly third generation individuals and families were more likely to shop at the multiple retailers. An authentic presence on Tesco shelves, therefore, was important to meet this shopper’s expectations.

60 4.4 Patak’s Around the World

We are the most widely available Indian food brand around the World, with a presence in 56 countries including: Canada, North and South America, Europe, the Middle East and Australia. Patak’s is the market leader in the USA, Canada, Australia, New Zealand and Holland.

International Business Development Manager From Patak’s view of the globe the Indian food market in the UK was the most sophisticated in the world (discounting the home continent - obviously). Australia was next in the line of sophistication, where Patak’s claimed activity levels around 60-70 per cent compared with the UK. Selected markets in Europe came next, for example Holland, where traditional links with Indonesia and a general consumer acceptance of spicy food made the category popular. America was the virgin market that Patak’s had been working in for the last two years. The company preferred to enter a new market by working with a selected distributor, who knew the local market, the retailers and trade. In the relationship, Patak retained control over the brand, product and distribution into the country and from there worked with the distributor, sharing knowledge about the consumers, interaction with the category. The USA, however, needed a different entry strategy to that followed elsewhere in the world because of its market structure. With a distinct absence of national retailers and a regional structure based on complex supply chains through brokers, distributors and retailers, a joint venture partner with established distribution channels and market knowledge was the means Patak’s used to start building a presence in this vast country. Hormel Foods Corporation (best known for its meat product, Spam) was the partner selected. Terms behind the relationship were not disclosed, but the company was named Patak’s Food USA and Kirit Pathak was named Chairman. All of Patak’s products around the world were sourced, ready packed and labelled, from the factory near Wigan, UK and were exactly the same as the product sold into the UK market. The only concessions to local tastes were made on the labels, which were printed in 12 different languages, and, since they were the main means of talking to the consumer about Indian food, were given slightly different names. The International Development Manager explained: We don’t advertise in many of the countries where we sell, so the main point of sale is the pack - so this is where we can increase accessibility. In the UK for example, everyone knows what Tikka Masala is, but Internationally we label the same product Rich Tangy Coriander and Lemon cooking sauce - Chicken Masala. Consumers find this less scary than some of the Indian names they do not recognise. The other thing we have done on the pack, is to put heat levels on them all. This is an effort to educate the customer away from the misperception that all Indian food is hot. Of the seventy products in the Patak’s UK range, forty were sold overseas with a core offering of seventeen. As in the UK the brand typically was introduced into the ethnic sector first, often because of the local ethnic distributor’s initiative in phoning Patak’s and

61 requesting supply. The non-Asian consumer sector followed and required more effort from the Patak management team. The strong link with the ethnic distributors was attributed to Patak’s success in international markets. The International Development Manager explained: We don’t really have close competitors abroad. Our range is more comprehensive than Sharwood’s who take a much more mainstream approach and the ethnic brands don’t really understand the mainstream. It takes a company like Patak’s that has products with integrity and the mainstream knowledge that can bridge the markets. We are also more widely distributed than any other Indian food brand. Although the company did not monitor their market presence abroad extensively there was a confidence that the Patak brand was gaining a significant foothold in world markets in both the ethnic and mainstream retail sectors. Management claimed to have established excellent relationships with their distributor partners and that they were able to transfer their learning from the UK market successfully to other markets, winning them competitive advantage over competitors. They also acknowledged that in the majority of these markets there was very little immediate need for competitive activity, since the growth potential in most of them was substantial, and that to have more than one player developing the market and educating the consumer could only be beneficial for the market in general. The other point management recognised was that in these young markets price was rarely an issue. Abroad, Patak confirmed that they could charge higher prices than competitors, based on their authentic offer and, with retailers, their willingness to support the product with in- store demonstrations, tastings, recipe information, educational material and promotions.

4.5 Indian - Not Ethnic

In 1998 Patak (Spices) Ltd was still a family business, firmly controlled by the son of its founder. Financial information was not disclosed, but turnover was estimated to be between £35 million and £45 million6 by the end of the year - a huge increase since the beginning of the decade. As well as serving the independent retailers and restaurants via ethnic distributors and mainstream cash-and-carries, the company manufactured some own - label products for the multiple retailers, had a presence in chilled and frozen ready meals and manufactured products for sale into the food service sector under the Knorr brand name through their partner company, Best Foods (once CPC). The Marketing Director said: At the moment, ours is a relatively simple business, where cost is not the main issue. The more we sell the more we make in returns. We have become more efficient over the past two years, and we do recognise that the UK market is edging toward maturity, some of the cash-and-carry business is fairly price sensitive, but price is not the competitive focus - especially in Retail. Why had Patak’s been so successful over the last eight years? Apart from what the story tells so far, the managers at Haydock would have included the Indian focus as a reason why they had outshone rivals: We are single-minded, we don’t have Chinese to divert us. There was also the consistency with the Indian family heritage, the name and the quality/authentic

6 These figures are believed to include worldwide sales, not just the UK figures used earlier in the case.

62 positioning as well as enormous value of the knowledge and experience of the cuisine, the culture and the country that Meena and Kirit brought into the business. This not only won them credibility, and gained them access to suppliers at home, but resulted in an intuitive feel for the business that fuelled their new product development process without huge volumes of costly market research. From an outsider’s point of view, there was something in the woodwork at Patak’s. Size had an influence. The company was small, busy, friendly,but not frantic, stressed or worried. There was a hands-on feeling about the people, who talked with great enthusiasm about Indian food - it felt as if it was their business. Ideas were in the air and there were opportunities to share them, test them and develop them without bureaucracy to wade through in advance. The consumer was never far from the minds of the managers at Patak’s, and intuition and imagination appeared to be the guiding rules of their game. Much of this must be attributed to Kirit Patak, who had shown great leadership during the 1990s and about who one manager said (with a warm smile): Kirit is the one who most often comes up with ideas which are completely out-of-the-box. Some of them seem ridiculous, but he is the one who is constantly challenging our fundamental assumptions.

63 Appendix 4.1

The Regions and Cuisine of India

Bengal

Bordering the Bay of Bengal, in the Hoogly River, there is an abundance of sea life. Bengali cuisine is, therefore, renowned for its fish - considered by the local people to be a symbol of fertility. Bengalis combine fish with various delicate spices and a typical dish would be Tandoori Fish or a Fish Head Curry. Spices most often found in Bengal are chillies, cardamom and turmeric. Bengalis also have a very sweet tooth and no meal is complete without a dessert such as Gulab Jamans - deep fried dough balls served in syrup infused with saffron.

Gujarat

The birth state of Gandhi and Lord Krishna, Gujarat is a Hindu, vegetarian state. Meals tend to consist of dry ingredients of which Bombay Potatoes and Onion Bhajis are classic examples. Garlic, ajwain and cumin are traditional spices used in Gujarat cuisine. Gram flour, made from chick peas, provides a rich source of protein. It is used in many breads such as puris and chapattis which are eaten paper thin served with mango chutney, a speciality of the region. A typical meal will comprise at least two vegetable dishes, one of which will be dry, along with dhals, rice, bhajis, yoghurt and breads served with pickles and chutneys, all eaten from a stainless steel plate known as a ‘thali’.

Hyderabad

As capital city of the state of Andhra Pradesh, the only Muslim state in the Hindu dominated south, Hyderabad is justifiably proud of its exotic cuisine. Chicken Korma, made from a blend of sixteen spices combined with coconut, almonds and cream, is the authentic taste of Hyderabad. Other specialities of the region include Lamb Kebabs - skewers of meat cooked in a tandoor oven - and aromatic Biryanis - a layered rice and meat dish that can be prepared in many different ways. Tamarind, red chillies and coriander are abundant in this region.

Kashmir

Nestled into the valley of the Himalayas, Kashmir is often compared to paradise. The lush greenery of the valley supports an abundance of crops, including crocuses which provide the precious crop of saffron. Kashmir food is a gourmet’s joy. The region has perfected the art of preparing lamb either served in a Rogan Josh sauce with a ‘Raita’ made from natural yoghurt and cucumber; or as wonderfully light and delicately spiced meat balls known as Kofta, which are eaten as a popular snack. At banquet occasions Kashmir Lamb - an exquisite dish combining nuts and apricots - is often served.

64 Kerala

A land of contrasts, Kerala is the spice centre of India, luring traders from all over the world. Known as ‘black gold’ and renowned as the best in the world, black pepper plants clamber up Eucalyptus trees whilst elegant coconut trees line the shores. Further inland grow cloves, cardamom and ginger. The wealth of sea life satisfies the fish-loving Keralites. Hot and spicy dishes, laced with coconut, are the speciality of this region and the world famous Vindaloo originates from here. No meal is complete without a dish which combines rice and yoghurt known as Dahi Sadham.

Rajasthan

A state where palaces of marble white and sandstone red shimmer in the blazing heat. The region has varied culinary tastes which have been influenced over the centuries by invading Turks, Persians and Afghans. The famous Tikkas and Tandooris originate from Rajasthan - created by the Rajput warriors fleeing from the invading troops. Typically, food is either roasted or grilled over flames. Roasted vegetables are a speciality served with ghee (clarified butter) which adds a richness of flavour. Fenugreek, dill and fennel are some of the spices grown here.

(Source: The True Taste of India - Patak’s promotional material)

65 Appendix 4.2

Product Names and Descriptions

Balti Cooking Sauce

Balti is the name of the dish that this North West Indian recipe is served in. A Balti has dominant flavours of coriander, cumin and tomatoes and is aromatically laced with cardamoms, mace and ginger.

Biryani Paste

This paste is traditionally used for biryani recipes which combine meat, fish or poultry in a pot. It is typical of the Andra Pradesh region of India (the only Muslim state in Southern India).

Dhansak Cooking Sauce

A popular recipe introduced to India by Persian Kings. This sweet and sour dish derives its flavour from a blend of mild spices, garlic and lentils.

Jalfrezi Cooking Sauce

Jalfrezi is a Kashmiri dish, with dominant flavours of sweet peppers and coconut. This mild dish is traditionally cooked with chicken.

Korma Curry Paste

Korma is a classic North Indian dish. This recipe has a delicate coconut flavour, with delicious hints of garlic, ginger and coriander.

Madras Cooking Sauce

Madras originates from Kerala, Southern India. This region is the main spice - growing state. Coriander, cumin and red chillies make up this strong authentic flavour.

Mild Curry Paste

A delicate blend of mild spices ideal for a wide range of Indian dishes

Rogan Josh

Rogan Josh originates from the Kashmir region of India. A popular dish on Indian restaurant menus. It has delicate tomato and cardamom flavour.

66 Sweet Mango Chutney

A chutney is a preparation of exotic fruits or vegetables preserved by cooking in sugar and spices. Sweet Mango Chutney is popular in Indian restaurants, and is ideal served with chicken dishes.

Tandoori Paste

The tandoor is a clay oven, used mostly in Northern India. The result is a succulent cross between barbecuing and baking and this is the traditional blend of spices for marinating the meat before cooking.

Makhani

Makhani originates from central India and has a subtle butter flavour highlighted by the addition of fennel seeds.

Makhanwala

In Northern India this dish was served at royal occasions. The rich tomato and butter flavour with hints of coconut, coriander and lemon perfectly compliment the chicken.

Karai

Derives its name from a small cooking vessel, similar to a wok, used in central India. The spicy sauce contains cumin, tomatoes, coriander and fennel.

Pasanda

Pasanda was introduced by the great Moghul emperors. Selected mild spices are combined with almonds, yogurt and cream to create this rich, mild and creamy sauce.

Dopiaza

Piaz is the Indian word for onions and Do pronounced Doe means twice. This Northern Indian dish is made with twice as many onions as the weight of meat.

67 Chapter 5: Case Study, Sharwood’s - The Next Challenge

Susan March and Julie Verity

Reversals have always meant for Mr Sharwood a spur to fresh effort. [A Fruitful Fifty Years, C.L.T.Beeching]

Sharwood’s is the long-term market leader in the UK Indian pickles and condiments industry, holding 29 per cent of the £179.2 million UK ethnic foods market. Indeed, it is still the major player in both the £97.6 million Indian (29.4 per cent) and £81.6 million Oriental (27.4 per cent) foods sectors, which grew at a rate of 9.3 per cent and 1.8 per cent respectively in the 12 months to 13 June 1998.

However, this share is much less than the nearly 50 per cent of the ethnic market Sharwood’s has reported holding in the early 1990s [Keely Harrison, Super Marketing 19 June 1992]. In that article the company is quoted as having a 70 per cent share of the £30 million Indian market, nearly half of the £22.5 million Chinese sector and over 60 per cent of the £8 million chutney market.Sharwood,s best seller, Green Label Mango Chutney, dates back to the 1890s.

As one of only two major authentic Indian food brands on the market today Sharwood’s faces strong competition on many fronts: from the mainstream and own-label7 brands and from its major rival in the authentic sector, Patak’s and the new player, Tilda. In some categories, especially the fast growing sauce-in-jar category, Sharwood’s holds only 10.1 per cent of the market having lost distribution in the canned sauces sector with 22.5 per cent of this market in 1998. This contrasts with its strength in the long established and expanding chutney market where it retains 59.4 per cent market share (combined share for the popular Green Label and Sharwood’s other brand chutneys) and in the declining curry pastes market (30.9 per cent share).

Sharwood’s has a long history and reputation for identifying new opportunities and creating and developing niche markets. Combined with the strengths of its parent company, Rank Hovis McDougall (RHM) and an active marketing and new product development team the company is well-equiped to compete in the highly competitive, more mature phase of the UK Indian condiments and pickles market.

7 The retailer own label in UK is not the same as the generic label concept. Some own label brands, eg Sainsbury are themselves premium brands in the market place

68 5.1 Colonial Beginnings

Sharwood’s proudly cite their long history and the traditions begun by their founder, James Allen Sharwood over one hundred years ago:

James Sharwood commenced his career in business with a sound education, three European languages and the guiding motto of his mother, ‘Be Thorough,’ behind him. He commenced his career as foreign correspondent for an insurance firm, but when an uncle died he was invited to assist in the deceased’s business as a wine merchant. He set about studying the intricacies of the wine trade and two or three years later was invited by the proprietors of one of the oldest established grocery firms in the City of London to open up a wine and spirit department, a venture which was very successful. Through long hours in the business he became thoroughly acquainted with the distributive side of the grocery business - experience which would prove invaluable in his later moves into importing and manufacturing.

The Anglo-Indian origins of the company go back to the time when Mr. Sharwood began importing continental conserves and comestibles at the behest of the Viceroy of India (Lord Dufferin) - or more particularly at the behest of his French chef.

Following this, J A Sharwood & Co was established at No 77, Carter Lane in the City of London on 6 June 1889 as ‘importers and exporters of foreign produce’. In the early days the business dealt in French produce. Mr. Sharwood’s command of French led his company into several decades of trade in crystallised fruits after a Frenchman, with no command of English, called on him offering him these rare delicacies of the time. James saw the opportunity, pioneered and developed the trade and set about making it easy for the grocer to sell such items. With his ‘Be Thorough’ motto to guide him, this pursuit took him to the Continent in an effort to persuade the producers to package the items attractively in mixed boxes ready for the consumer to give as a gift. Previously they had only been exported in bulk. Another product with which the company was associated in its early days was olive oil from Provence.

Mr Sharwood himself attributes much of his success to his ability to recognise the opportunity when it presented itself, and to his readiness to seize it and act upon it and make full use of it. [A Fruitful Fifty Years8]

In the early 1890s Indian food was introduced and added to the product range. Offerings included spice blends, pickles and chutneys imported from Bombay and Madras. Appendix 5.1 details the beginnings of the chutney venture, in which a debtor sought to discharge his debt with a case of ‘Ship Brand’ Chutney. Chance, combined with Mr. Sharwood’s confidence and foresight saw this trade develop to the point where chutney had come from obscurity to be a household word in the first quarter of this century. In the process, Sharwood’s developed an enduring relationship with its Indian suppliers.

8 An Extract from ‘A Fruitful Fifty Years’ written by C.L.T.Beeching, F.G.I. to commemorate James Allen Sharwood’s fifty years in business on 25th October 1875

69 The company began manufacturing the ‘White Label’ Sauce range at the end of last century after acquiring their first manufacturing site in 1899 in Offley Road, close to the Oval. Following the First World War, Sharwood’s introduced ‘Green Label’ Chutney and endorsed it with an extensive advertising campaign, adopting the ‘Tom-Tom’ man as its trademark. (See Appendix 5.2 for later examples). Thus began Sharwood’s use of brands and trade marks supported by advertising and promotions to develop markets for new products.

When James Allen Sharwood retired in 1927 the company continued under the stewardship of the other directors, but Mr. Sharwood’s legacy continues to influence the company to this day.

The company was awarded the Royal Warrant in 1947 as ‘Manufacturers of Chutney and purveyors of Indian Curry Powder’ for the supply of these items to H.M. King George VI, confirming Sharwood’s established position in the British grocery trade.

It was in 1963 that Sharwood’s was acquired by Rank Hovis McDougall and based at Willesden, North London. In 1965 manufacturing was transferred from Sittingbourne to Greatham.

Today Sharwood’s is a separate company within the Rank Hovis McDougall (RHM) Group. In fact it is one of 21 companies within the RHM - Food Products - Division of Tomkins, RHM having been acquired by the Tomkins Group earlier in the 1990s. Tomkins, an acquisitive conglomerate, has 73 operating units in total.

Sharwood’s could easily have been absorbed into the body of Rank Hovis McDougall when it became part of that company in the 1960s. [Super Marketing 1992] The fact that it managed to retain its own distinct identity is testament to its strong culture, sense of history and tradition and its established position in the market.

In the 1970s Sharwood’s had two strong products, Green Label chutney and Vencat curry powder. This was the time when Indian and Chinese restaurants had become established in the high street, there was a growing interest in ethnic foods and cooking them at home. Sharwood’s created two whole ranges, each with about 50 products, one of Indian foods and one of Chinese foods. The Indian range included curry powders and chutneys, masalas, pickles, pastes, puppadums, dhals, basmati rice, naan and chapati mixes.

[From an article by Andrew Summers, Rank Hovis McDougall in Food Marketing 3,3]

The concept was to provide all the ingredients to help people make Indian or Chinese food at home as fine as they experienced in their better local restaurant. To this day Sharwood’s maintains its authentic pedigree having its staff travel extensively just as the original Mr Sharwood had done, bringing back ingredients and recipes.

70 5.2 The Ethnic Niche Expands

The markets for Indian and Chinese foods in the UK have grown significantly since those early days. The market overview section of this report details this growth. Mintel reports that between 1990 and 1996 the value of the UK Indian Food Market increased by 48 per cent to £310m (a rise of 33 per cent in real terms), of which retail grocery accounts for £109 million. It would be fair to say that thanks largely to Sharwood’s the niche had been created and developed.

5.3 Intense Rivalry in the Authentic Indian Niche

In the early 1990s Sharwood’s was one of only two major authentic players in the market. It had been the long - term market leader and the others had largely copied its products. The market for Indian foods was growing fast. But by the mid-1990s their rival in the authentic niche, Patak’s, proving to be a formidable competitor in some lines. Sharwood’s product range and prices are detailed in their 1998 price lists in Appendix 5.3.

On Indian food, we are about a third bigger than Patak’s. In terms of manufacturer share of the total ethnic market, Patak have about 10 per cent and Sharwood’s have 30 per cent. However, I don’t know how much of their business goes through the restaurant trade, that is hard to find out. In terms of overseas sales, I think we are about the same size - they are slightly bigger in Australia and perhaps in the States where they started first, but we are growing fast.

I’m sure Kirit (Pathak) has an ambition to be bigger than Sharwood’s in Indian - I think label shares have stabilised now and I suspect we have a greater volume of own label production for the supermarkets. [Elaine Underwood, MD Sharwood’s - July 1998].

Sharwood’s claim a 35 per cent manufacturer share of the ambient grocery9 ethnic market and to be category captains in Safeway, J Sainsbury and Asda. Sharwood’s frozen range is manufactured, sold and distributed through RHM Frozen. During the interview Ms. Elaine Underwood reported the following:

On the grocery side, there are a lot of players competing for a limited amount of shelf space and there is a limit as to how much more shelf space all the major store groups can give. Retailers are looking for high convenience items, chilled, fresh, high unit cost items where the stores can generate high profit margins. More people are eating out, so there is pressure on the retailer’s food space. Also, retailers are going to supply take-out meals themselves to try and capture part of this market. Asda are introducing the Curry Pot to their range; at their Canterbury store they are opening a fast food restaurant featuring curries and Chinese food ready-to-go. Tesco are introducing ready-to-go foods. All these trends depress the traditional sectors. The players who survive will be those that innovate the fastest to provide genuinely different products.

9 Ambient grocery items include all those on the store shelf at room temperature, ie. excluding chilled and frozen items.

71 5.4 The Foodservice Sector

Sharwood’s is a relative newcomer to the foodservice sector, but sees great potential for growth. Sharwood’s only really entered the foodservice market about 5 years ago. We set up a separate team and developed a specific range of products. Chefs want us to provide something that is flexible - that they can add their own particular emphasis to, so the foodservice sector is not a straight translation from the retail one. Working with foodservice you have to give more in terms of recipe development, scale-up work, technical advice and price is important since here the customer’s focus is on cost per portion. [Elaine Underwood, July 1998] From September 1998 Sharwood’s foodservice range is to be marketed through RHM Foodservice.

5.5 Manufacturing and the International Scene

The centenary of Sharwood’s in 1989 marked the beginning of several changes in the operations of the company. In that year, Sharwood’s distribution operation was established at Nuneaton in the Midlands. In July 1991 Sharwood’s Head Office and stand-alone systems were established at Egham in Surrey, where 70 people are employed.

Back in 1992 Sharwood’s reportedly did not have a dedicated manufacturing facility but had to negotiate for space on RHM production lines. Manufacturing now takes place at the Greatham, Hartlepool, factory which employs 180 people. This operation was transferred to Sharwood’s from RHM Foods in May 1994.

I think we do have certain advantages on the manufacturing side. Patak’s are very knowledgeable about spices, pastes and pickles. We are very good on pappadums. On sauces we are a bit neck-and-neck. Patak have invested heavily in manufacturing capability over the past 5-10 years, but we have too. [Elaine Underwood, Sharwood’s July 1998].

Sharwood’s reportedly manufacture Pappadums in Madras and ship to the UK for packing while ready to eat pappadums are manufactured at the RHM’s Wythenshawe facility. About fifty percent of the product portfolio is out-sourced. At Sharwood’s Ms Elaine Underwood said: We source some of our products from overseas as finished product, but a lot are manufactured here and exported. I think that will change in the longer term when the business overseas gets big enough. It is volume - related and now some of the overseas markets are getting large enough, and are growing at such a rate that there is going to be a point where local manufacturing will need to be considered.

Sharwood’s major international markets include the USA, Australia and Northern Europe,exporting through the RHM export division – Grocery International. The only market Sharwood’s admitted to tailoring to local needs was the American market, where labelling and communications are distinctly different from those used elsewhere. In the States the label focused on Mr J A Sharwood, thereby appealing to the colonial/explorer image derived from the British heritage. Although food products themselves are not adapted to local tastes, Ms Elaine Underwood indicated this would change in the future as

72 overseas markets developed. Sharwood’s export through the RHM export division - Grocery International.

An industry source (former Sharwood’s employee) stated that Sharwood’s procurement process was very complex. Being part of the RHM group meant that some purchasing could be done corporately and a transfer price negotiated between individual businesses. He said that at least twenty different routes to supply were commonly used, some part processed, some as raw ingredients. Super Marketing, 1992, states that: Three-quarters of Sharwood’s business is with the multiples and it trades with 27 countries around the world, either selling products via RHM’s export arm, Grocery International, or sourcing product ingredients. Lemon grass and kafir lime leaves are flown in fresh every Thursday from Thailand, and its pappadums are made in Madras and take six weeks to be shipped to the UK.

5.6 New Product Development

Back in 1992 Sharwood’s had drawn up a five-year plan in which they intended to become more international within their product range. The company’s objective was to achieve a mixture of cuisines from around the world to complement their brand leadership in Indian and Chinese food ( Keely Harrison in Super Marketing, 1992). Apparently the company did have a French range some years ago and launched anti pasto in the early 1980s - unfortunately ahead of the market. This time they were determined to be one jump ahead of the growth in Thai, Vietnamese and Malaysian style restaurants. The company planned to explore the area of convenience foods further and hoped to develop more time-saving products such as its ready-to-eat pappadums. Ms Elaine Underwood said,

New ideas were pooled from the country of origin, high street restaurants and ethnic cooking consultants. The marketing and NPD teams are encouraged to eat out regularly in restaurants on expenses. Consumers also play a vital role in product development - letters from consumers and responses to advertorials are all analysed and acted upon.

Around 36 new products were launched every year and its product list stretched to 160 items. Nearly 70 per cent of the current products (in 1992) were not around 10 years before, reflecting Sharwood’s continual adaptation to new food trends.

Today’s product list (see Appendix 5.3) is even more expansive and does incorporate Thai stir-fry sauces, Thai curry sauces and Thai satay sauces as well as a range of speciality products including tomato puree, quick dried vegetables and mushrooms in salted water. In 1998 Sharwood’s introduced a new range of Three Summer Sauces. Ms Elaine Underwood said about these:

The positioning of the new summer sauces is about flavour and not heat. They are targeted at adding interest and variety for people who do not want very hot foods. They are based on recipes that our development team found when I sent them to Kerala (south-west coast of India) about 15 months ago.A team of three people went, visited families, saw the way they cooked and prepared food and returned with 60 recipes from which we have introduced three. They are produced with many local ingredients, coconut and mangoes. We have had a

73 fantastic response from the trade who have listed all of them and are giving us shelf space. This is because about 70 per cent of the market is at the ‘mild end’ in Korma, Tikka Masala, perhaps Jalfrezi - and there has been so little innovation here. Our new sauces bring excitement and choice. We are running to keep up with the orders. We know consumers like them because we have done a lot of research.

The comments at Patak’s about this new range of sauces were positive. Their comments were complimentary about the packaging - which is very different, with transparent labels allowing the soft yellow and orange colours of the sauces to show through. They were also very impressed with the idea and positioning. The only negative comments from Patak’s related to taste. Elaine’s quote also indicates the amount of time it might take to bring a new product to market (the current researcher perceives that this would be shorter at Patak’s) and the effort they have invested in finding new ideas.

5.7 Promotion

During 1995 Sharwood’s ran advertising campaigns for its Balti Stir Fry sauces and its Ready-to-Eat pappadums. At the end of 1996 the company introduced its first corporate branding advertising campaign with a commercial that focused on images to contrast the traditional Far East with the vibrant new economies of today rather than individual products and lines. The advertisement highlighted the fact that half the world’s population lives in the Far East with the strapline: It’s half the world. It’s Sharwood’s. “Stir up Some Passion” advertising campaign is run through TBWA Simons Palmer.

5.8 The Future

By 1997-98 Sharwood’s turnover had reached £52 million. Although remaining the market leader in the Indian and Chinese food sectors, the company had lost share, in some categories mainly to Patak’s. Also, recognising the potential competition from other Asian cuisines, and using the corporate muscle of its parent company, Rank Hovis McDougall, to expand its foodservice, frozen meals and international business it added Thai products to its range. With this broader business base and its long history, the company was in many respects looking to be a solid player within its market sector.However, the question remained, would this be the model to outperform its main rival?

Similar to Patak’s, Sharwood’s saw new product development as the key to success, fuelling growth in the market in general as well as its own market share. Sharwood’s approach to NPD was based on a thorough process of research and overseas travel, reminiscent of the path of its founder, James Allen Sharwood a century ago.

Further, like Patak’s it saw the foodservice sector as the sector of growth opportunity, although it had only been in this market for five years and perceived it as relatively price sensitive. Overseas markets are expected to occupy many at the Egham head office as they seek greater margins than those achievable in the maturing home market. Sharwood’s

74 suggested the logical next step for both competitors, would be to open local production facilities in countries which had volume to justify expansion. Logically, Australia would be one of the main countries under consideration.

75 Appendix 5.1

Sharwood’s - The Beginnings of the Chutney Trade

An Extract from ‘A Fruitful Fifty Years’ written by C.L.T.Beeching, F.G.I. to commemorate James Allen Sharwood’s fifty years in business on 25th October 1875

The great feat of Mr. Sharwood has been to make chutney a household word and, through the medium of every enterprising grocer, to place it on the tables of all classes of the community.

The beginnings of the story were in this wise man. Situated in the City there was a small importing house which bought flavouring essences from Sharwood’s. The house ran up a bill and could not find the cash wherewith to settle it; one day on being pressed to pay, the proprietor of the firm suggested that Mr. Sharwood might take some of the later-to-be-famous “Ship Brand” Chutney in discharge of the debt. To this he agreed, but so small was the demand that it remained in stock for twelve months and seemed likely to repose there for ever. A way to move it was, however, found when one of the firm’s travellers seeing it in the warehouse undertook to introduce it to his customers. This he did with such success that the original lot of chutney was soon exhausted and the buyers were continually asking for more. Naturally the traveller pressed Mr Sharwood to send to Bombay for a further consignment, and nothing loath, he wrote direct to the makers, the firm of Manockjee, Poonjiajee & Sons, enclosing his draft for £50 and requesting them to ship chutney to that amount. Thus was the first trickle of the great and continuous stream of the celebrated chutney from India to these shores begun; other orders followed and just at that time the great depreciation in the sterling value of the rupee supervening, Mr. Sharwood was enabled to buy so favourably that he in turn could supply the chutney to the grocers at such a rate that they could offer it to the public at a popular price.

And he left no stone unturned to help the grocer to sell it. He himself travelled in those days and many a grocer would say, “Oh! send me a dozen,” to be met with the reply, “No! I would rather not. If you have only a dozen you will put it on your shelves and there it will remain. Let me send you at least a case of six dozen. You can then show it in your window and it will sell like hot cakes.” And grocers found that his recommendations were justified by the sales. He next elaborated on neat cards the various kinds of “Ship Brand” Chutney - Sweet Sliced Mango, Green Mango, Colonel Skinner, Tirhoot Cashmir and the rest - each being accurately described according as it was pulp or pieces, sweet or hot, sour or mild and so on. The grocer, as he should, found his wholesale chutney house at his back and assisting him all the time, a state of things which continues to this day and is still in being when more than half of all the imports of chutney reach the public through the house of Sharwood. For the rest we may recall that the war well over, the firm introduced the now famous “Green Label” brand in order that a great advertising policy might be properly inaugurated, and the “Tom-tom” man, as its trademark, bids fair to take a place in the same gallery as “Johny Walker,” the “Fry Girl,” the “Quaker” and “Sunny Jim.” In 1923-4 Mr Sharwood paid a visit to India on chutney business, with an eye to curry powder and other condiments also. The original house of Manockjee Poonjiajee & Sons of Bombay is now an integral part of the firm, whilst the products of Vencatechellum, famous all over the world for curry powder, are also controlled by Sharwood’s.

76 Appendix 5.2

77 Appendix 5.3

78 Appendix 5.3 (Cont…/2)

79 Appendix 5.3 (Cont.../3)

80 Appendix 5.3 (Cont…/4)

81 Chapter 6: Market Characteristics – India, Malaysia and Singapore

Suku Bhaskaran

6.1 Introduction

The chapter below will review the South Asian culinary products industry and market for these products in India, Malaysia and Singapore. India is an important producer of fruits and vegetables and the products being reviewed are the traditional foods in India. The researcher postulated that owing to these strengths (raw material availability and product knowledge) and other competitive advantages India is known to possess (low wages, a sizeable trading community with Indian ancestry in many countries), manufacturers of South Asian culinary products in India could pose a competitive threat to Australian companies. In view of this, a review of the developments within this industry in India was undertaken.

Malaysia and Singapore were included in the review because these two countries have large (more than 2 million) populations of Indian ancestry. Since these countries were open economies with liberal trade regimes and because Australian companies had long - standing business links in the region, it was postulated that Malaysia and Singapore could provide export opportunities to an Australian - based South Asian culinary products industry.

6.2 Research Methodology

This chapter was completed through desktop research and unstructured face-to-face interviews with key informants in manufacturing companies, food service outlets and grocery retailers. The major manufacturers, wholesalers and retailers of these products were identified through secondary research and discussions with individuals with local knowledge of the business environment operating in these countries. Research assistants were then appointed (one person in India and another in Malaysia) to collate information from secondary sources (annual reports, company brochures and to conduct a review of product listings in retail outlets). Using the information from these secondary sources and preliminary discussions with persons with knowledge of the market, key issues were identified. These were itemised as broad themes for discussions with leading informants in Malaysia, Singapore and India. A research assistant (Ms Varsha Bayai) completed the primary research in India. The principal researcher undertook the primary research in Malaysia and Singapore.

82 6.3 Market Overview - India

India is a major producer of a wide variety of fruits and vegetables. However, less than 2 per cent of the country’s fruit and vegetable production is processed into value-added products. Production of pickles, preserves and chutneys represents about 11 per cent (154,000 tonnes per year) of India’s total production capacity in the processed fruits and vegetables sector. Production of pickles and chutneys increased from 22,900 tonnes in 1985 to 64,600 tonnes in 1993 (Figure 6.1), an average increase of 22.8 per cent per year. Data on the volume of production of curry sauces and curry pastes were not available. Most of the companies were focusing on the production and export of curry powder.

Figure 6.1: Trends in the Production of Pickles and Chutneys, 1985-1993 ('000)

Tonnes 30

- 1985 1986 1987 1988 1989 1990 1991 1992 1993 Year Production (tonnes) Source: Ministry of Food Processing Industry

The South Asian culinary product sector in India is predominantly a small-scale industry. Most companies manufacture a range of products especially including spice powder, chutney, Indian snack foods, desserts. Total sales turnover for even the largest companies (including public listed companies) was only around A$10 million to A$15 million per year. For example Chorida Food Products Limited, one of the principal export-oriented companies in the sector reported a turnover of Rs 224 million (A$10 million) in 1996-97. Information on other companies and their product range are shown in Appendix 6.1.

Some multinational companies based in India,for example Hindustan Lever (Indian subsidiary of the Anglo-Dutch conglomerate Unilever), Nestle India and Godrej Phillsbury, have introduced a range of Indian condiments, pickles and chutneys. In 1996, Nestle India introduced five varieties of pickles (Lime, Lime Sweet, Mango, Mango Punjab and Mixed Pickle). Currently these companies are focusing on the domestic market in India. The

83 perception of trade sources is that there are substantial opportunities to expand the sales of branded and commercially produced chutneys and pickles into the market. It was reported that demand for curry pastes and sauces were less likely to develop in the short to medium term. In a report in India Today (7 July 1997), Sindhu Jain proposed that ‘cooking intermediates’ (sauces and condiments) are rapidly expanding in India because "... the Indian market is not yet prepared for the ready-to-eat packaged food, which could be too expensive for most pockets, given the high cost of refrigeration ... ". The same report cites H.S.Girish of the Indian Market Research Bureau as saying "While the perception of convenience in cooking for most people was restricted earlier to canned food, they are now accepting time-saving cooking intermediates." These observations and the activities of multi-national food manufacturers in India suggests that the upwardly mobile urban middle class in countries such as India are more likely to adapt to 'cooking intermediates' such as sauces and chutneys rather than ready-to-eat meals.

In 1994-95 India exported about 14,000 tonnes of pickles, chutney and sauces. Nearly 95 per cent of this total was made up of pickles and chutneys while only minimal quantities represented curry pastes (102 tonnes in 1994-95) (Table 6.1).

Exports of pickles and chutney increased substantially, from 8,116 tonnes in 1992-93 to 13,625 tonnes in 1994-95 (an increase of 34 per cent per year). Mango chutney is the largest export item and account for more than 30 per cent of total exports of pickles and chutney. Exports of mango chutney increased from 1,613 tonnes in 1992-93 to 5,249 tonnes in 1994-95, an increase of 113 per cent. The export of curry paste increased marginally (2 per cent per year) from a relatively low base of 99 tonnes in 1992-93 to 102 tonnes in 1994-95.

Table 6.1: Export Destinations of Pickles, Chutneys, Sauces, and Pastes from India (1992-93 to 1994-95)

Products 1992-93 1993-94 1994-95 (tonnes) Chilli Pickles 415 579 563 Green Pickles 56 55 45 Mango Pickles 2,255 2,517 2,686 Mango Chutney 1,613 4,496 5,249 Tomato Chutney and Paste 701 734 685 Lemon Chutney 98 102 66 Tamarind Concentrate Chutney 275 447 384 Other Pickles, Chutneys and Pastes 2,703 3,716 3,947 TOTAL PICKLES & CHUTNEY 8,116 12,646 13,625 TOTAL CURRY PASTE 99 147 102 Source: Ministry of Commerce (1996)

84 India’s principal export destinations for these products are shown in Table 6.2. India exports the products listed to a large number of countries and over the period 1992-93 to 1994-95 exports to most destinations increased. Although the United Kingdom remained the most important export destination for Indian products, exports to countries such as the Netherlands, Sri Lanka, Saudi Arabia and the United States of America increased substantially.

Table 6.2: Exports Destinations of Pickle and Chutney from India (1992-93 to 1994-95) Destination 1992-93 1993-94 1994-95 (tonnes) United Kingdom 3,048 3,493 4,365 United States of America 1,007 1,193 1,487 United Arab Emirates 956 1,274 1,354 Saudi Arabia 781 1,236 1,322 Sri Lanka 10 226 1,463 Germany 532 584 562 Australia 166 713 675 Belgium 6 120 610 Japan 367 498 528 Netherlands 293 307 586 Canada 315 380 386 Spain 15 48 567 Kuwait 321 300 341 Italy 391 10 368

The small to medium sized companies in this sector export a wide range of products, including minimally processed products, to different destinations. Curry powders are an important product line for most of these companies. India’s exports of curry powder increased from 2,457 tonnes in 1992-93 to 3,489 tonnes in 1994-95 (Table 6.3), an increase of about 21 per cent per year.

85 Table 6.3: Exports Destinations of Curry Powder from India (1992-93 to 1994-95) Country 1992-93 1993-94 1994-95 (tonnes) United Kingdom 875 837 1,360 Kuwait 142 256 242 United Arab Emirates 90 166 207 Australia 193 315 200 Germany 75 116 174 Saudi Arabia 214 187 153 Belgium 177 110 139 Canada 66 62 138 France 45 137 134 USA 144 205 157 Baharain 49 84 106 Netherlands 16 21 89 Switzerland 37 43 69 New Zealand 19 34 56 Nigeria 23 34 46 Hong Kong 52 39 45 Italy 53 33 26 Qatar 18 35 21 Others 169 216 127 TOTAL 2,457 2,930 3,489 Source: DGCIS, Ministry of Commerce

Officials of industry associations and key industry informants were of the opinion that this sector was not among the leading priorities in the Government’s industry development plans. Government and industry officials indicated that Indian companies are not in a position to penetrate the international market for these products under Indian proprietary brand names. They felt that it would be more beneficial for small to medium Indian companies to form strategic alliances with overseas companies for marketing, especially product packaging, advertising and promotion. The substantial increase in India’s exports of these products in recent years appears to be the outcome of strategic alliances between Indian companies and companies in export markets. Several companies are exporting minimally processed fruits and vegetables for the chutney and pickle industry in the United Kingdom.

The Indian government is actively encouraging and providing incentives to foreign investors and joint-venture companies to start up export-oriented food processing facilities in India. The result has been the opening of several joint ventures in the food-processing sector. These investments are based on contracting Indian farmers to grow crops required by export-orientated food-processing companies. Most investment by foreign companies is for minimal processing of fruits and vegetables for use in the manufacture of ‘Western’ foods. Between 1993 and 1995 about 80 joint-venture fruit and vegetable processing companies were established in India. Of these, there was only one investment (Weikfield Agro Products Limited, United States of America) for manufacturing Indian condiments,

86 pickles and chutneys. The other investors are manufacturing products such as cocktail onions, pickled gherkins and tomato puree.

6.4 Market Overview - Malaysia and Singapore

The varieties and range of South Asian culinary products reviewed in this study are not a mainstream grocery line in Malaysia and Singapore. South Asian culinary products are predominantly sold through grocery stores owned by ethnic Indians. Supermarkets such as Jusco, Yaohan, Carrefore, Cold Storage, MTUC, Giant and Jaya carry a limited range of pickles and chutneys. South Asian curry sauces and pastes were not stocked in any of these stores.

The range and level of stock of South Asian culinary products in supermarkets in Malaysia and Singapore appeared to be substantially less than in Australian supermarkets. Discussions with supermarket executives suggested demand for these products was low. Executives were of the view that market penetration for these products was low in all segments of the consumer market (including the ethnic Indian population).

South Asian curry sauces, curry pastes and chutneys are not manufactured in Malaysia and Singapore although small quantities of pickles are manufactured domestically. A large number of small-scale 'millers' operate to grind spices and blend spice powders to produce curry powder and spice mixes. These small-scale manufacturers then sell curry and spice powders direct to households through cash van sales or to grocery and food service outlets (Indian restaurants). Smaller volumes of curry powders and spice powders are sold to supermarkets.

The two major brands of curry and spice powders in Malaysia and Singapore are Baba’s and Lingam. These companies import or purchase the spices from importers, then grind and blend to produce various powdered curry mixes.

The Lingam company manufactures a range of pickles. It imports minimally processed cut and salted mango and lime pieces from South India, mixes these with various ingredients (spices and oil) and packs them into glass bottles. With the recent fall in the value of currencies in the ASEAN region it seems that the cost of imports from India has increased. The company is now planning to import minimally processed products from Thailand.

The executives in Lingam and Baba’s reported demand for South Asian curry sauces, pastes, chutney and pickles in Malaysia and Singapore was insufficient to establish modern manufacturing facilities. They advised Malaysian consumers preferred to use curry powders and, consequently there was little demand for curry sauces or pastes. They were of the opinion that the attributes of the Patak’s and Sharwood’s products were not suitable to the Malaysian market because these products were for the preparation of North Indian cuisine. The majority of the Indian population in Malaysia and Singapore are Tamils from South India. These demand patterns reflect the substantial variance in the cuisine in different regions throughout India. Most Malaysians, including the Chinese and Malays,

87 have adapted to and appear to prefer South Indian cuisine. The executives in Lingam and Baba's reported that, although out of home eating of Indian foods was very popular (especially by the Chinese), the habit of cooking Indian cuisine in non-Indian households had not 'taken-off'. Pickles (especially lime and mango) prepared to South Indian recipes were reported to represent a niche market – used only by older age ethnic Indians. Chutney was not used in Indian households in Malaysia although the product was targeted at the up- market Western restaurants and a small number of North Indian restaurants.

Almost all imported chutney and pickles come from India. Import levels are small and lower than Australia’s imports of these products from India. (Table 6.4).

Table 6.4: Imports of Condiments, Sauces and Chutneys from India – Australia, Singapore and Malaysia

Country 1993/94 1994/95 1995/96 Australia 299.87 674.70 336.66 Singapore 234.63 193.04 243.63 Malaysia 93.30 135.16 200.04

Many supermarkets in Malaysia stocked a brand of Malay cooking sauce, Bhraim’s. Dewina Food Industries Sdn Bhd, a medium-sized Malaysian company, manufactures this product. Discussions with executives from Dewina suggested that the company’s principal business is the production of military rations since it supplies the Malaysian and Sri Lankan army with ready-to-eat meals in retort-pouch packs. Dewina has extended its product line and now manufactures a range of Malay cooking sauces. It has positioned itself as a manufacturer of 'Halal' products, prepared according to Islamic precepts. Executives at Dewina further suggested the market for cooking sauces in Malaysia was still in its infancy and that there were many opportunities to develop the market. Dewina reported it had a wide network of agents and wholesalers throughout Malaysia and overseas. The company has also exported its products to Australia, but found the 'off-take' for its products low. It is now planning to re-launch its products in Australia.

Perceptions regarding opportunities to develop the market for curry pastes and sauces by executives in Lingam and Baba’s were different compared with Dewina. Dewina had introduced a range of Malay cooking sauces and condiments and forecast that their market in Malaysia and Singapore to expand substantially. Lingam and Baba’s were of the opinion that the market for cooking sauces and condiments in Malaysia and Singapore remains small and unlikely to grow rapidly in the medium term. The differences in view reflect the different target markets of these companies. Dewina is targeting the upwardly mobile Malay urban middle class whereas Lingam and Baba’s appear to be concentrating on the traditional ethnic South Indian market segments.

88 Discussions with key informants in retail outlets suggested sales off-take of curry sauces was low. Retailers reported stocking these products purely to demonstrate a large product strategy offering. They reported a firm understanding with suppliers that unsold or slow moving lines can be returned. Therefore, it would appear the extensive distribution of some brands of Malay curry sauces does not necessarily demonstrate high sales off-take of these products. Some executives in grocery outlets suggested in-store tasting, sampling and other promotional activities could encourage the development of the market for these products.

6.5 Conclusions

Manufacturers of South Asian culinary products in India are predominantly small-scale companies and to date have not introduced modern processing and marketing methods. Small-scale Indian companies do not produce curry sauces and pastes tending to concentrate on the manufacture of chutney and pickles. Multinational companies in India have introduced a range of pickles appearing to target the large domestic market in India.

Demand for South Asian culinary products in Malaysia and Singapore appears to be low. It is, therefore, unlikely that in the short to medium term companies in Malaysia or Singapore will manufacture these products. Opportunities to develop sales of these products to Western-type food outlets and the more affluent segments of the population are apparent. The field study and secondary sources of information confirm that Patak’s and Sharwood’s are targeting the European and North American markets and, therefore, there is little threat from these companies to domestic producers.

89 Appendix 6.1

Companies and Product Range

1. Chorida Food Products Ltd. 48/A, Parvati Industrial Estate Pune Satara Road PUNE – 411 009 (INDIA) Tel: (0011-91-212) 43 5534/35/36 Fax: (0011-91-212) 47 7833

Brand: Pravin

Product Line Product Variety

Pickles Mango, Lime, Green Chilli, Mixed, Mix Vegetables, Lime and Green Chilli

Paste Biryani, Kebab, Tikka, Vindaloo, Garam Masala, Sambar, Curry, Kashmiri Masala, Tandoori, Ginger, Garlic

Chutneys/Relishes Sweet Lime Pickle, Sweet Mango Pickle, Chunda, Murabba, Mango Chutneys, Tomato Ketchup

Single Ingredient Spice-Powders Red Chilli, Coriander Seed, Turmeric, Cumin, Black Pepper, Ginger

Multiple Ingredients Spice-Powders Tounge – Tickling Onion Garlic Spice, Garam Masala, Sambar Spice, Pickle Spice, Spice for Garden fresh mix vegetables dish, Spice for chickpeas or Garbanzos in a rich gravy, Spice for Chaat, Jaljeera Spice, Biryani/Pulao Spice, Milk Mixture, Tea Mixture

Instant Mixes Idli, Medu Wada, Moong Dal Pakoda, Gulab Jamun, Dhokla

Snack Foods Man Pasand Chiwda, Corn Chiwda, Garlic Sev, Sev, Farsan Mix

2. Nestle India Ltd. M-5a Connaught Circus NEW DELHI –110 001 (INDIA) Tel: (0011-91-11) 332 907/332 9025 Fax: (0011-91-11) 332 1438

Brand: Maggi

Product Line Product Variety

Pickles Mango, Mango Punjabi, Lime, Lime Sweet, Mixed

90 3. Sarang Foods Private Ltd. 552 Gandhi Colony MUZAFFARNAGAR – 251 001 (INDIA) Tel: (0011-91-131) 41 2917/41 2089 Fax: (0011-91-131) 41 1447

27/61, Rajinder Nagar (Old) NEW DELHI - 110060 (INDIA)

Brand: Sara

Product Line Product Variety

Paste Garlic, Ginger, Onion, Mustard, Mint, Coriander, Garlic, Ginger & Chilli.

Pickles Mango (hot; mild; sweet & sour), Lime (mild; sour; whole; sweet), Lime & Green Chilli, Green Chilli (whole & cut), Brinjal (mild; hot & sweet), Kasandhi (pickle of mango, lime & chilli), Mixed, Mushroom, Pickle in Mustard Masala, Garlic, Ginger Pickle in spices, brine & vinegar

Chutneys Mango (sweet; hot; sour; bengali club; major grey; katki; chunda; kashmiri), Mixed Fruit, Peanut & Mango

4. M. M. Poonjiaji 42, Anandilal Podar Marg BOMBAY - 400 002 (INDIA) Tel: (0011-91-22) 201 2412/208 2774 Fax: (0011-91- 22) 208 2774/ 208 3184/ 2062847

Brand: Ship

Product Line Product Variety

Paste Vindaloo Curry, Madras Curry, Tandoori, Tikka, Moglai, Kashmiri Masala, Garam Masala

Pickles Mango, Lime, Chilli, North Indian Vegetable, Lime & Chilli, Garlic

Chutneys Major Grey’s Mango, Bengal Club, Mixed Fruit, Cashmere, Mango Choonda, Mango Katki, Sweet Lime, Tomato

91 5. American Dry Fruits Ltd Acme Industrial Estate 3rd Floor, Sewree Bunder Road, Sewree (East), BOMBAY- 400 015 (INDIA) Tel: (0011- 91- 22) 412 1188/412 5577 Fax: (0011-91- 22) 413 7373

Brand: Ashoka

Product Line Product Variety

Paste Vindaloo, Tandoori, Tikka, Madras Curry, Curry, Meat Masala

Pickles Bringle, Mixed, Lime, Mango, Garlic, Chatpata

Chutneys Major Greys, Mango, Kashmir, Mango & Ginger, Exotic Fruit & Nut

Ready –To-Eat Foods Matar Mushroom, Palak Paneer, Paneer Makhani, Punjabi Choley, Navratan Korma, Baigan Bharta

6. V. P. Bedekar & Sons

Brand: Bedekar

Product Line Product Variety

Pickles Mango, Lime, Mixed, Green Chillies, Vadu Mango, Avakkai Mango, Mango Chilli, Lime Chilli, Sweet Lime

Spices Ready Pickle Mix, Sunday Special, Garam Masala, Goda Masala, Malvani Masala, Tea Masala, Jal Jeera Masala, Sambhar Masala, Gujarati Garam Masala, Pav-Bhaji Masala, Pan-Puri Masala, Chana Masala, Chat Masala

Spice Powder Turmeric, Corriander, Cumin Seed, Black Pepper

Other Products Metkut, Kesari Milk Masala, Masala Supari

92 7. P. Mittulal Lalah & Sons P. Box 2473 No 54, Nelson Manicka Mudaliar Road CHENNAI - 600 029 (INDIA)

Brand: Lalah’s

Product Line Product Variety

Curry Pastes & Curry Slabs (complete Hot, Mild, Vindaloo, Tandoori, Jalfrezi, Karai Mix precooked products)

Chutneys & Pickles Sweet Mango Chutney, and variety of Indian pickles

Tamarind Concentrate For pharmaceutical food and sauce and sauce manufacturing industries

Curry Powder & Masalas Fifty blends of curry powders

Pappadums & Pappads Plain and spiced varieties

Compounded Asafoetida Used for flavouring Indian cooking

Spices and Spice Products Whole and ground spices

8. M.T.R. International 2971, 1st Floor Esturi Tower K.R.Road,B.S.K. 2nd Stage BANGALORE - 560 070 (INDIA) Tel: (0011-91-80) 64 1806/665 0569/665 0234 Fax: (0011-91-80) 665 0227

Brand: MTR

Product Line Product Variety

Pickles Mango Avakai, Mango Slice, Mango Full, Lime, Gongura, Tomato, Mixed Vegetable, Hogplum

Powders Sambar, Rasam, Vangibhath, Puliyogare, Chatney Chilly ,Turmeric, Dhaniya, Jeera, Pepper

Masalas Chana, Bisibelebhath, Pulao, Pav Bhaji, Garam, Madras Rasam, Madras Sambar, Sagu Masala

Instant Mixes Rava, Idli, Kharabhath, Rasam, Vada, Dosa, Jamun, Rice Idli, Bisibelebhath, Sambar, Rava Dosa, Badam Feast, Cheese Vada

9. M. V. J. Foods (India) Private Ltd HB No. 7, Panampilly Nagar COCHIN – 682 036 (INDIA)

Brand: Melam

Product Line Product Variety

Pickles Mango, Lime, Mixed Vegetables, Ginger, Garlic, Meat, Fish, Prawns

Curry Powders Chicken, Tandoori, Sambar, Rasam

Spice Powders Chilly, Coriander, Turmeric, Pepper, Cumin, Ginger

10. Rani Food Products Chorode, Vadakara KOZHIKODE DIST - 673 106 (INDIA) Tel: (0011-91-496) 51 2034/51 2342/51 2509 Fax: (0011-91-496) 51 3176

Brand: Rani

Product Line Product Variety

Vegetarian Pickles Lime, Mango, Tender Mango, Garlic, Ginger, Mixed Vegetables, Ginger Chutney

Curry Powder Sambar, Rasam, Meat Masala, Fish Masala, Chicken Masala, Garam Masala, Biriyani Masala, Vegetable Masala, Tandoori Chicken Masala

Spice Powders Chilli, Coriander, Turmeric, Cumin, Black Pepper, Dry Ginger

Whole Spices Chilli, Coriander, Turmeric, Cloves, Cinnamon, Mustard, Fenugreek, Cumin , Fennel, Cardamom, Dry Ginger, Nutmeg, Black Pepper

Crushed Spices Chilli, Turmeric

Other Items Coffee Powder, Idly Powder, Compounded Asafoetida Powder, Condiments Powder, Copra, Coconut Oil , Coconut

Tea Dust, Leaf

11. Omni Exports Inc 37/3716 Manikkiri Cross Road PO Box No. 2454, Pallimukku KOCHI – 682 016 (INDIA) Tel: (0011-91-484) 36 2960/36 3948 Fax: (0011-91-484) 36 3948

Brand: Classic

Product Line Product Variety

Pickles (Veg. & Non - Veg.) Mango, Tender Mango, Lime, Garlic, Mixed Gooseberry, Ginger, Bittergourd, Prawns, Fish, Meat Pickles

Chutneys Coconut, Idli, Prawns

Curry Powder Rasam, Pickle

Masalas Meat, Chicken, Egg, Tandoori, Fish, Garam, Sambar

Spice Powders Chilli (hot), Special blend (mild), Kaddi Chilli (piriyan), Coriander, Turmeric, Pepper, Fenugreek (methi), Cumin Seed, Ginger

Rice Products Puttu Podi, Palappam Podi, Idiyappam Powder, Dosa Mix, Idli Mix, Rice Powder

Other Products Pappadum/Appalam, Tamarind Slab, Kokum , Fennel Seed, Cumin Seed, Stemless Chilli, Coconut Powder, Cream, Coconut Oil, Gingelly Oil, Biscuits & Confectionery, Ada, Semia, Short Vermicelli, Macaroni, Whole Pepper, Cardamom, Whole Masalas, Cashew, Rice, Coffee Powder, Jaggery, Asafoetida, Urid Powder

95 Chapter 7: Production Facility: Pre-Feasibility Report Anand Garg, Suku Bhaskaran and Mukesh Gupta

7.1 Introduction

The market analysis (Chapter 2) suggested that the retail sales value of South Asian culinary products was more than $37 million and that demand for this product category was expanding. Based on this finding the researchers decided to analyse the commercial viability of starting up a small-scale production facility in Australia. Following a rigorous search for a consultant with technical skills in establishing a processing facility for South Asian culinary products, the researchers identified and selected two experts from India to assist with the technical aspects of this project. The technical consultants were in Australia for about three weeks and worked closely with the research team. In addition, the researchers consulted several industry representatives (manufacturers of plant and machinery, equipment fabricators, suppliers of equipment and machinery, building contractors, contract manufacturers of sauces and pastes, suppliers of raw materials and suppliers of packaging materials). A selected list of the persons and companies consulted is contained in Appendix 7.1.

7.2 Assessment of Project Viability

7.2.1 Assumptions

The researchers had to make some assumptions in preparing this report. In all instances the validity of these assumptions was carefully examined by checking with industry experts and cross-validating the information through obtaining the opinion of more than one expert in the field.

The following assumptions were made in preparing the feasibility report:

Production Capacity

The project feasibility study was based on starting up a small-scale greenfield manufacturing facility. Two levels of production throughput were evaluated: 540 tonnes (50 per cent plant utilisation) and 1,080 tonnes (100 per cent plant utilisation).

These plant utilisation levels are based on a single shift operation for 220 days per year.

A throughput of 540 tonnes was estimated to be 5 per cent of the 1996-97 sales volume of the product category in Australia. A throughput of 1,080 tonnes was estimated to be 10 per cent of the 1996-97 sales volume of the product category in Australia.

96 Production levels of 540 tonnes or 1,080 tonnes would enable substantial and speedy scaling-up of production levels through increasing capacity utilisation.

Product-Mix

A throughput of 540 tonnes would comprise the following mix of product-lines:

Pickles: 60 tonnes Mango Pickles: 18 tonnes Lemon Pickles: 12 tonnes Mixed Pickles: 30 tonnes

Chutney: 240 tonnes Sweet Mango Chutney: 120 tonnes Hot Mango Chutney: 120 tonnes

Curry Paste: 180 tonnes Tandoori Paste: 80 tonnes Tikka Paste: 100 tonnes

Curry Sauce: 60 tonnes

It is assumed that with production levels of 1,080 tonnes, throughput of these product-lines (pickles, chutney, curry paste and curry sauce) will be doubled. The throughput and product-mix in the larger facility (1,080 tonnes) was estimated as follows:

Pickles: 120 tonnes Mango Pickles: 36 tonnes Lemon Pickles: 24 tonnes Mixed Pickles: 60 tonnes

Chutney: 480 tonnes Sweet Mango Chutney: 240 tonnes Hot Mango Chutney: 240 tonnes

Curry Paste: 360 tonnes Tandoori Paste: 180 tonnes Tikka Paste: 180 tonnes

Curry Sauce: 120 tonnes

97 Land, Building, Machinery and Equipment

The costs of land and building are based on starting up a small-scale greenfield manufacturing facility in the Shire of Melton, Victoria. Melbourne was chosen as the production base because it is central and well connected to the major domestic market for these products: Victoria and New South Wales.

The cost of constructing the manufacturing plant was based on the building specifications (Appendix 7.2) and drawings (Appendix 7.3) that were presented to contractors. Effluent treatment facilities (Appendix 7.4) were also incorporated in the quotations.

The quotations for machinery and equipment were based on specifications that were provided to equipment manufacturers, suppliers and fabricators. A schedule of manufacturing and service equipment and its technical specifications is provided in Appendix 7.5 and Appendix 7.6.

Raw Material and Packaging Material

Cost of raw material and packaging material were computed through in-depth discussions with suppliers. Prices quoted were the delivered prices to the production facility in Melbourne. Quantities for raw materials and ingredients required for a throughput of 540 tonnes (60 tonnes of pickles, 240 tonnes of chutney, 180 tonnes of curry paste and 60 tonnes of curry sauce) are shown in Appendices 7.7, 7.8, 7.9 and 7.10. The quantity of raw materials and ingredients for a throughput of 1,080 tonnes (120 tonnes of pickles, 480 tonnes of chutney, 360 tonnes of curry paste and 120 tonnes of curry sauce) will be double.

Some raw materials, especially mangoes, would need to be sourced from Queensland and the Northern Territory. It was assumed that raw materials would be purchased from wholesalers based in Melbourne. The prices for raw materials are based on ‘manufacturing quality’ products (not table quality). Suppliers were informed of the quantity of produce that will be required. Suppliers provided information on the availability of produce, the best periods to purchase this produce and the packaging in which the produce will be supplied. Raw material costs are shown in Appendix 7.11- 7.15 and the costs of packaging material are shown in Appendix 7.16.

Information on the specification of spices is shown in Appendix 7.17 and information on the specification of the ingredients required is shown in Appendix 7.18. It is assumed that whole spices will be purchased and that these will be processed into powder at the factory.

98 7.3 Production Process There are two types of South Asian pickles (salt pickles and oil pickles) and two types of South Asian chutneys (sweet chutney and hot chutney). Edible oils such as canola, mustard and sesame oil are used for preparing pickles.

The production process for pickles is shown in Diagram 7.1A, 7.1B and 7.1C, the production process for chutney is shown in Diagram 7.2A, 7.2B, the production process for curry paste is shown in Diagram 7.3A, 7.3B and the production process for curry sauce is shown in Diagram 7.4A, 7.4B. The key elements in the production process are as follows:

Pickles

fruits and vegetables received at the factory are mechanically washed, sorted and inspected. In this study we have assumed the sorting of the fruits and vegetables will be undertaken with a colour sorter. Some manual sorting of damaged produce and waste material will also be undertaken at this stage

sorted and cleaned produce is then mechanically peeled using an abrasive peeler

peeled fruits and vegetables are then cut into pieces (1.5 cm length, 1.5 cm width and 0.6 cm thickness cm) using a fruit cutting and/or dicing machine

stone (seed) in produce such as mangoes will be removed

produce is then cured in salt solution for a minimum of 30 days

salt-cured fruits and vegetable slices are than washed in water to remove salt

washed salt-cured slices of fruits and vegetables are then added to salt, spices, oils and other ingredients in a ribbon mixer

ribbon mixer is rotated at speeds of 25 to 30 revolutions per minute for about 20 minutes. This will facilitate the thorough mixing of fruit and vegetable slices with salt spices, oils and other ingredients

sliced fruit and vegetable mixture is then poured into sterlised clean glass bottles

pickle in the container is then topped with oil to prevent its exposure to air

bottles are then sealed and labelled

bottled pickles are packed into trays and palletised

product is ready for sale after an incubation of seven days

99 prior to releasing the products for sales the product will be checked at random for purposes of quality assurance

Chutney

The process in manufacturing chutney is similar to the process of manufacturing pickles up to the stage where the produce is grated. This section will discuss the processes that follow thereafter.

sweet chutney is prepared either from gratings of fruits and vegetables that are fresh or have been stored in brine solution. Generally, the fruit or vegetable gratings are 3.5 cm long, 1.5 cm wide and 0.6 cm thick.

The fruit and vegetable gratings are mixed with sucrose, salt and a spice mixture of coarsely ground clove, cardamom, ginger and red chilli powder and cooked to a jam consistency

vinegar or food - grade glacial acetic acid is added

with some recipes, other ingredients such as raisins, currants and almonds are also added

the product is packed hot into presterilised bottles and sealed air tight

preparation of hot chutney is similar to that of sweet chutney except that more spices and less sucrose are used in the recipe

Curry Paste

Raw spices are inspected using a colour sorter and through manual inspection. Spices are then cleaned, ground into a coarse powder mixed with oil, onion paste, garlic and water. This mixture is cooked under vacuum with colouring and acetic acid added. The flavouring of the curry paste is determined by the spices that are used. Details of the spices and other ingredients are shown in the costings.

Curry Sauce

Raw produce is inspected, pulped and stored in a tank. Sucrose and spice extracts are mixed thoroughly and cooked at 100 degrees Celsius. The mixture is then poured into sterilised glass bottles or polyjars, sealed, labelled and packed into trays for palletised stacking. The products are stored for incubation of seven days and quality checked prior to releasing for sale.

100 Diagram 7.1A: Stage 1 – Preparation of Semi-Processed Raw Materials, Pickles

RECEIPT 100 KG (Fresh Fruit & Vegetables)

100 KG

100 KG WASHING

100 KG 100 KG SORTING & 100 KG INSPECTION

SOLID WASTE REJECT 6 KG (Bad Produce) PEELING

(If Required) SKIN WASTE

94 KG

100CUTTING KG SOLID WASTE REJECT 94 KG (1.3 cm x 1.3 cm/piece) 4 KG (Under Size)

90 KG

STONE REMOVING REJECT 90 KG 30.6 KG (Only For Mango) (Stone)

59.4 KG

59.4 KG WEIGHING

59.4 KG

DUMPING AND STORAGE

59.4 KG (25% Salt Solution) 19.8 KG ADDITION OF SALT

79.2 KG

CURING IN BARRELS 79.2 KG (Minimum 30 Days)

101 Diagram 7.1B: Stage 2 - Mixing Additives to Semi-Processed Products, Pickles

Process Follows from the Last Stage in Diagram 7.1A

79.2 DUMPING OF CURED 79.2 KG CUT PIECES IN WASHING TANK

79.2 KG

WASHING IN 79.2 KG 13.2 KG REJECT - SALT STORAGE TANK 66 KG

66 KG SORTING 1 KG REJECT - FRUIT

65 KG 65 KG WEIGHING

65 KG

BATCH PREPARATION 65 KG

3.75 KG OIL

INGREDIENTS 17.0 KG BATCH MIXING

96.25 KG (About 920 Minutes) 10.50 KG SPICES

96.25 KG

96.25 KG QUALITY CHECK

102 Diagram 7.1C: Stage 3 - Bottling and Packaging Process, Pickles

Process Follows from the Last Stage in Diagram 7.1B

96.25 KG

EMPTY BOTTLES TO FILLER FILLING AFTER WASHING & DRYING 96.25 KG (Under Vacuum) OIL TOPPING 3.75 KG

LUG CAP SEALING 100 KG 100 KG

OUTER WASHING OF GLASS 100 KG BOTTLES 100 KG

OUTER HOT AIR DRYING OF 100 KG BOTTLES

100 KG

100 KG LABELLING OF BOTTLES

100 KG

TAMPER - PROOFING 100 KG (Neck Wrapping) 100 KG

TRAY PACKING/ 100 KG SHRINK WRAPPING

STORING

(Minimum 7 Days)

DESPATCHING

103 Diagram 7.2A: Stage 1 – Preparation of Mango Chutney

83.3 KG RAW MANGO RECEIPT

83.3 KG

83.3 KG WASHING

83.3 KG

83.3 KG SORTING & INSPECTION 3.3 KG REJECT (Bad Produce) 80 KG

80 KG PEELING 7 KG REJECT (Skin Waste)

73 KG SLICING REJECT 73 KG 20 KG (Stone) 53 KG

53 KG DICING 3 KG REJECT (Juice etc.) 50 KG 50 KG WEIGHING

50 KG SPICES & OTHER 0.6 KG o INGREDIENTS COOKING 110 C SUCROSE & 50 KG 49.4 KG ACETIC ACID

100 KG 100 KG COOLING SYSTEM

104 Diagram 7.2B: Stage 2 - Bottling and Packaging Process, Mango Chutney

Process Follows from the Last Stage in Diagram 7.2A

100 KG

INSPECTION TABLE 100 KG 100 KG

INLET HOPPER OF SCREW 100 KG CONVEYOR (Stainless Steel)

100 KG

100 KG COLLECTION TANK

100 KG VACUUM FILLING EMPTY BOTTLE AFTER 100 KG WASHING & DRYING

100 KG

100 KG LUG CAP SEALING

100 KG

OUTER WASHING OF 100 KG GLASS BOTTLES

100 KG 100 KG HOT AIR DRYING OF BOTTLES 100 KG

100 KG LABELLING OF BOTTLES

100 KG

100 KG TAMPER - PROOFING

100 KG

TRAY PACKING & SHRINK 100 KG WRAPPING

STORING & INCUBATION

DESPATCHING

105 Diagram 7.3A: Stage 1 - Preparation of Curry Paste

80 KG RAW SPICES 80 KG

INSPECTION REJECT 80 KG 0.8 KG 79.2 KG

GRINDING 79.2 KG 3.2 KG REJECT 76 KG

MIXING WITH OIL, ONION 24 KG WATER 76 KG PASTE & WATER

100 KG

WATER COOKING 3 KG 100 KG UNDER VACUUM EVAPORATION

97 KG POST COOKING 2.7 KG ACETIC ACID 97 KG ADDITIONS 3 KG RED COLOUR 102.7 KG KG 102 7KG QUALITY CHECKING

102.7 KG PASTE FILLING EMPTY BOTTLE AFTER

102.7KG (Under Vacuum) WASHING & DRYING

102.7 KG

102 7KG LUG CAP SEALING

106 Diagram 7.3B: Stage 2 - Bottling and Packaging Process, Curry Paste

Process Follows from the Last Stage in Diagram 7.3A

102.7 KG

OUTER WASHING OF 102 7 KG GLASS BOTTLES

102.7 KG

HOT AIR DRYING OF 102 7KG BOTTLES

102.7 KG

100 KG LABELLING OF BOTTLES

102.7 KG

TAMPER - PROOFING 102.7KG (Neck Wrapping)

102.7 KG

TRAY PACKING/ 102 7KG SHRINK WRAPPING

STORING (Minimum 7 Days)

DESPATCHING

107 Diagram 7.4A: Stage 1 - Preparation of Curry Sauce

30 KG RAW MATERIAL

30 KG

29 KG INSPECTION 1 KG REJECT

29 KG

29 KG MAKING PULP 14 KG REJECT (SEEDS)

15 KG

50 KG SUCROSE 15 KG POST PULP ADDITIONS 10 KG SPICES - EXTRACT 75 KG

10 KG ADDITIVES JAGGERY 15 KG 103 KG PULPER - FINISHER 3 KG WATER

103 KG

COOKING AT 100oC WATER 103 KG (One Boil Only) 3 KG EVAPORATION

100 KG

100 KG QUALITY CHECKING

108 Diagram 7.4B: Stage 2 - Bottling and Packaging Process, Curry Sauce

Process Follows from the Last Stage in Diagram 7.4A

FILLING

100 KG (Under Vacuum)

LUG CAP SEALING 100 KG

OUTER WASHING OF 100 KG GLASS BOTTLES

100 KG

HOT AIR DRYING OF 100 KG BOTTLES

100 KG

100 KG LABELLING OF BOTTLES

100 KG

TAMPER - PROOFING 100 KG (Neck Wrapping)

100 KG

TRAY PACKING/ 100 KG SHRINK WRAPPING

STORING (Minimum 7 Days)

DESPATCHING

109 7.4 Profit Analysis

The estimated profits (before tax) for starting up a small-scale greenfield South Asian culinary products processing facility with a production capacity of 540 tonnes and 1,080 tonnes are summarised in Tables 7.1 and 7.2.

A plant with a production capacity of 540 tonnes will return a profit (before tax) of $836, 770 (22.3 per cent) and a plant with a production capacity of 1,080 tonnes will return a profit (before tax) of $2,887, 355 (38.5 per cent).

Table 7.1: Profit and Loss Statement, Plant Capacity 540 Tonnes (50% Capacity Utilisation) Items Expenditure ($) Capital Expenditure Land and Building (Appendix 7.19 ) 1,745,700 Plant and Machinery (Appendix 7.20) 1,908,950 Start-up Expenses (3% of land, building, plant & machinery costs) 109,640 3,764,290

Sales Turnover (Appendix – 7.21) 3,748,800

Operating Expenditure: Raw Material (Appendix 7.11-7.15 ) 917,715 Packaging Material (Appendix 7.16 ) 313,200 Fuel and Power (Appendix 7.22) 68,928 Fixed Costs: Personnel (Appendix 7.23) 517,400 Maintenance (3% of building, plant and machinery) 109,640 Central Administration - phone/fax etc (5% of personnel cost) 25,870 Depreciation (10% of building, plant and machinery) 365,465 Interest - Term Loan @10% of $1,882,145 (Debt/Equity ratio 1:1) 188,214 Interest on Working Capital @10% (2 months raw material, personnel, packaging, 30,719 2,537,151 fuel and administrative expenses)

Marketing Expenses (Advertising & Promotion @ 10% of Sales) 374,880

Total of Expenses 2,912,031

Gross Profit (Before Tax) 836,769

110 Table 7.2: Profit and Loss Statement, Plant Capacity 1,080 Tonnes Items Expenditure ($) Capital Expenditure Land and Building (Appendix 7.19 ) 1,745,700 Plant and Machinery (Appendix 7.20) 1,908,950 Start-up Expenses (3% of land, building, plant & machinery costs) 109,640 3,764,290

Sales Turnover (Appendix – 7.21) 7,497,600

Operating Expenditure: Raw Material (Appendix 7.11-7.15 ) 1,835,430 Packaging Material (Appendix 7.16 ) 626,400 Fuel and Power (Appendix 7.22) 137,856 Fixed Costs: Personnel (Appendix 7.23) 517,400 Maintenance (3% of building, plant and machinery) 109,640 Central Administration - phone/fax etc (5% of personnel cost) 25,870 Depreciation (10% of building, plant and machinery) 365,465 Interest – Term Loan @10% of $1,882,145 (Debt/Equity ratio 1:1) 188,214 Interest on Working Capital @10% (2 months raw material, personnel, packaging, 54,210 3,860,485 fuel and administrative expenses)

Marketing Expenses (Advertising & Promotion @ 10% of Sales) 749,760

Total of Expenses 4,610,245

Gross Profit (Before Tax) 2,887,355

The profit estimates are based on selling the products at highly competitive prices (about 20 per cent less than current retail prices) in the domestic market. This study has assumed a market penetration of 17 per cent (540 tonnes) or 34 per cent (1,080 tonnes) in the first year of operation. As shown in Table 7.3, the cost of production per unit decreases substantially when production is increased from 540 tonnes per year to 1,080 tonnes per year. The costings in this study suggest the manufacturing margins (earnings before tax) could be between 20 and 40 per cent depending upon product mix and production capacity.

Ex-factory price per kilo of product is shown in Table 7.3 and indicates the product can be manufactured at highly competitive prices. The ex-factory prices shown in Table 7.3 would deliver margins (based on retail prices of $12 per kg) of between 35 per cent and 75 per cent depending upon product sales mix and production levels.

111 Table 7.3: Processing Costs and Ex-Factory Sale Prices Product-Line Cost ($) Total Raw Material Processing Packaging Ex-Factory Cost Per Kg

Total Production: 540 Tonnes

Pickles (60) 88,581 279,780 34,800 403,161 6.72

Chutney (240) 287,403 1,119,120 139,200 1,545,723 6.44

Paste (180) 413,363 839,340 104,400 1,357,103 7.54

Sauce (60) 128,368 279,780 34,800 442,948 7.38

Total Production: 1,080 Tonnes

Pickles (120) 177,162 155,400 69,600 402,162 3.35

Chutney (480) 574,806 621,600 278,400 1,474,806 3.07 Paste (360) 826,726 46,620 208,800 1,082,146 3.00 Sauce (120) 256,736 155,400 69,600 481,736 4.01

112 Appendix 7.1

Wholesale Fruit and Vegetable Suppliers

Mr Robert Millis Ms Kim Micallef John Holman & Co Pty Ltd Ponte Fresh Food P/L Exporters Importers Fruit and Vegetables Fruit & Vegetable Wholesalers 111-120 Melbourne Markets Box 84 Melbourne Markets 542 Footscray Road 542 Footscray Road FOOTSCRAY VIC 3011 FOOTSCRAY VIC 3011

Mr Vincent Brancatisano Mr Vince Branacatisano Prestige Produce V. Brancatisano & Sons (Fruit) Pty Ltd 307-310 Melbourne Markets 314-319 Melbourne Markets 542 Footscray Road 542 Footscray Road FOOTSCRAY VIC 3011 FOOTSCRAY VIC 3011

Mr Dick Brancatisano Mr Albert Chin V. Brancatisano & Sons (Vegetables) Pty Ltd S.H. Chin Bros Pty Ltd 141-142, 181 Melbourne Markets Wholesale Fruit & Vegetable Merchants 542 Footscray Road 289-292 Fresh Centre FOOTSCRAY VIC 3011 542 Footscray Road FOOTSCRAY VIC 3011

Mr George Loe Mr John Whitburn Loe Bros Fruit & Vegetable Merchants Whitburn Farms 152-154 Melbourne Markets Ross Road 542 Footscray Road LINDENOW VIC 3865 FOOTSCRAY VIC 3011

Mr John Popilieff Mr Ben Kelly Datafresh Pty Ltd Kelly Bros Market Gardeners 29-30B Melbourne Markets Murray Valley Highway 542 Footscray Road YARRAWONGA VIC 3730 FOOTSCRAY 3011

113 Manufacturers and Suppliers of Laboratory Equipment, Chemical, Salt & Sugar, Edible Oil

Mr Peter Hughes Mr Trevor Parker Selby-Biolab Laboratory Supply (VIC) Pty Ltd 2 Clayton Road 17-19 Kalimna Avenue CLAYTON VIC 3168 MULGRAVE VIC 3170

Mr Fred Tiedemann Active Chemical Industries Australian Calibrating Services (A’ Asia) Pty Ltd 13/22 Dunn Crescent 126 Oxford Street DANDENONG VIC 3175 COLLINGWOOD VIC 3066

Mr Bill Bailey Ms Maxine Bolger APS Ajax Specialtychem Cheetham Salt Limited 7 Business Park Drive PO Box 165 NOTTING HILL VIC 3168 NORTH SHORE VIC 3214

Mr John Fowler Mr Tom Ryan Sugar Australia Pty Limited Peerless Holdings Pty Ltd 265 Whitehall Street 21 Evans Street YARRAVILLE VIC 3013 BRAYBROOK VIC 3019

Mr Anthony Mohan Mr Paul Berryman Chemsearch Australia Bertolli of Australia Pty Ltd 43 East Esplanade 4 Bruthen Street MANLY NSW 2095 PRESTON VIC 3072

114 Construction Companies, Equipment Manufacturers and Suppliers and Industry Groups

Mr David Keenan Mr Craig Lawlor Special Projects Officer Western Region Water Authority Melton Shire Council Locked Bag 2 MELTON VIC 3337 GISBORNE VIC 3437

Mr James Permezel Mr Jack Napior Vaughan Constructions Pty Ltd McGinley and Partners Pty Ltd PO Box 98 1 Bluff Road CARLTON SOUTH VIC 3053 BLACK ROCK VIC 3193

Mr Peter Raschle Mr Alan Barnard ESKO J.A.N. Constructions Pty Ltd ESKO J.A.N. Constructions Pty Ltd Level E, 42 Upper Heidelberg Road Level E 42, Upper Heidelberg Road IVANHOE VIC 3079 IVANHOE VIC 3079

Mr Brian Wellman Mr David Crompton FMC Food Tech Nustar International Pty Ltd FMC (Australia) Limited 82 Voltri Street Unit 63, 170 Forster Road MENTONE VIC 3194 MOUNT WAVERLEY VIC 3149

Mr Peter Carty Mr Tome Bandilovski Heat and Control Packaging KHS Pacific Pty Ltd 26 Business Park Drive PO Box 378 NOTTING HILL VIC 3168 TULLAMARINE VIC 3043

Mr Michael Stevens Mr Robert Lang COMGROUP SPC Ltd 64-66 Chifley Drive Andrew Fairy Avenue PRESTON VIC 3072 SHEPPARTON VIC 3632

Mr Greg McLardie Mr Eric Handy Chubpak Australia Pty Ltd Chubpak Australia Pty Ltd 322-328 Hammond Road 322-328 Hammond Road DANDENONG VIC 3175 DANDENONG VIC 3175

Mr Ken Evans Mr Robert Blackman Chubpak Australia Pty Ltd Eco – Gro International P/L 322-328 Hammond Road 230 Charman Road DANDENONG VIC 3175 CHELTENHAM VIC 3192

115

Mr Hassan Hilal Mr Rajiv Choudhary Pomodore Co. Pty Ltd Domino (Australia) Pty Ltd 215 Sydney Road Unit 2/7 Neutron Place COBURG VIC 3058 ROWVILLE VIC 3178

Mr Peter Hansford Ms Sue Titcum Agribusiness Initiative Agribusiness Initiative Natural Resources and Environment Natural Resources and Environment 15/8 Nicholson Street Cnr Mair & Doveton Streets EAST MELBOURNE 3002 BALLARAT VIC 3350

116 Suppliers of Spice

Mr Philip Bourke Mr Ray Accardo McCormick Foods Australia Pty Ltd Hoyt Food Manufacturing Industries Pty Ltd 71 Fairbank Road 27 Alex Avenue CLAYTON SOUTH VIC 3169 MOORABBIN VIC 3189

Ms Mary Hardour Mr Bill Yao Waters Trading Perfect Fine Food Australia Pty Ltd 31A Macedon Road 3 Olive Grove LOWER TEMPLESTOWE VIC 3107 KEYSBOROUGH VIC 3173

Mr Vincent Sequeira Mr A. Ilanko Hindustan Imports & Exports Pty Ltd Indo-Ceylon Spices 50 Greens Road Factory 4-5, 55 Sinclair Road DANDENONG VIC 3175 DANDENONG VIC 3175

Mr Inderjit Arora Spice Mahal Ravi Imports 7 Warrigal Road PO Box 508 OAKLEIGH VIC 3166 ESSENDON VIC 3040

117 Appendix 7.2

Brief Technical Specifications: Processing Plant

The following factors should be taken into consideration while designing the production block:

Architectural Requirements

• The entire building shall be of fly-proof design. • Optimum natural ventilation and lighting in operational areas for non-refrigerated sections. • Adequate number of air changes in the battery charging room and soil areas. • Adequate social / sanitary services. • Necessary office cabins for the staff working in various sections. • Quality control laboratory.

Foundation and Flooring • Live and dead loads under static as well as dynamic conditions of various equipment and structure, material movement by forklifts, storage in bulk bins, temperature and relative humidity etc. in various sections of the building. • Provision for future expansion of the building as indicated in the layout.

Galvanized Pre-Fabricated Steel Structure • Suitable for mounting/suspending pre-fabricated sandwiched insulated panels for walls and ceiling from inside the steel structure areas. • Nut and bolt assembly type ready to assemble at site. • Expansion of the building as indicated in layout drawing

Pre-Fabricated Sandwiched Panels • Various temperature and humidity conditions in different sections of the production block. • Insulated panel joints shall be designed for providing continuous insulation and vapour barrier.

118 • The selection of the thickness of the insulation for the walls and ceiling shall be so as not to permit more than 8 kcal / hr m2 he at flow across it in peak summer. • Nominal insulation shall be provided for strength and serviceability for the panels to be used in the non-refrigerated areas. • The panels shall have suitable profile to take care of expansion and contraction due to variation in temperature.

Insulated Doors for Various Sections

• These shall be sliding type and fabricated from sandwiched panels. • The thickness of the insulation shall be such as not to permit more 8 kcal / hr m2 heat transfer across the door for the refrigerated chambers. • The doors for the non-refrigerated areas shall be insulated with nominal insulation form strength and serviceability considerations. • The automatic sliding door shall comprise suitable electrical drive mechanism having control of opening and closing located in such a manner that it shall be possible to operate the door from the driver’s seat of the fork lift. These doors shall also be designed for safety arrangement so that in case of any obstruction in the passage of closing, it returns automatically.

Doors, Windows and Skylights

• Anodised aluminum framework shall be used for providing doors and windows for the office and social areas. • The ratio of fixed and openable windows for the various sections shall be sealed in such a manner so as to provide adequate natural ventilation and lighting. • The doors and windows shall have standard accessories like handle, lock etc. • The doors and windows opening to the atmosphere shall be of fly - proof design.

Roofing and Facia

• The sheets to be provided on the roof shall be in waterproof design having adequate slope for quick drainage of water. • Facias for all the four sides of the building shall be designed with GI pre-painted sheet facia.

119

Internal Electrification • Following minimum light levels shall be provided in the different areas : Loading and unloading areas - 300 Lux Processing room - 300 Lux Packaging room - 300 Lux Laboratory - 400 Lux Office area - 300 Lux Anteroom area and technical corridor - 200 Lux Dispatch section - 300 Lux Social area - 200 Lux

Drainage System • Quick drainage of water from the floor. • Non-clogging design of the drains suitable for passing the trims or culls of fruit and vegetables. • Non-deposition of silt in the drainage system.

120 Appendix 7.3

Building Plan

121 Appendix 7.4

Effluent Treatment

SOLID WASTE

The waste handling system shall be installed as an integrated unit for separating skin, leaves, culls, trims, dirt/sand etc. of various commodities which is carried along with the effluent emerging from the production block. The system shall have adequate capacity to cater to the peak rate of effluent emerging from the production block when all the sorting and preparation lines are in operation. Skin, leaves, culls, trims, dirt/sand etc. removed by the separating equipment of the waste handling system shall be continuously collected by mechanical means and discharged into waste bulk bin. The separating equipment shall be of non-clogged design to ensure uninterrupted flow of effluent. The material of construction to be used for this system shall be rust proof and non-abrasive.

LIQUID EFFLUENT

The effluent after the separation of solid waste shall be discharged into the main outlet pipe under gravity flow conditions to the effluent treatment plant. The expected characteristics of effluent after removal of the solid waste by mechanical screener are: Flow rate - 30,000 LPD pH - 5.2 Suspended solids - 250 MG/L BOD 5 at 200C - 200 “ COD - 300 “ Dissolved solids (Organic) - 200 “ Dissolved solids (Inorganic) - 200 “ The treated effluent will conform to the following acceptance standards: The nature and levels of components and characteristics of the waste discharged shall comply at all times with the standards and other requirements for the acceptance of such components and characteristics as are specified in this chapter except where the nature and levels of such components and characteristics are varied by the authorised officer pursuant to Clause 302 of Western Water’s Trade waste by - law 97/1

122 1. Physical Characteristics

1.1 Temperature

The temperature shall not exceed 38 degrees Celsius.

1.2 Solids a) Gross solids shall pass a bar screen with 13 mm openings between the bars and gross solids shall have a quiescent settling velocity not greater than 3 meters per hour. b) The suspended solids concentration shall not exceed 600 mg per litre. c) The total dissolved solids concentration shall not exceed 1000 mg per litre. d) No fibrous material which in the opinion of the authorised officer is likely to cause obstructions in the sewer or drain shall be present.

1.3 Oils, Greases, Organic material and Plastics a) There shall be no free or floating layer. b) Emulsified oil, fat or grease, organic materials or plastics which in the opinion of the authorised office are not bio-degradable shall not exceed 100 mg per litre when the emulsion is stable at a temperature between 10 degrees Celsius and 38 degrees Celsius and when the emulsions in contact with raw sewage within the range pH 4.5 to pH 10.0. c) Emulsified oil , fat or grease , organic material or plastics which in the opinion of the authorised officer are bio-degradable shall not exceed 500 mg per litre when the emulsion is stable at a temperature of between 10 degrees Celsius and 38 degrees Celsius and when the emission is in contact with raw sewage within the range pH 4.5 to pH 10.0. d) Emulsified Oil, Fat or Grease, Organic materials or Plastics shall not exceed 50 mg/L when the emulsion is unstable at a temperature between 10 degree Celsius and 38 degree Celsius and when the emulsion is in contact with raw sewage within the range pH 4.5 to pH 10.0.

1.4 Radioactivity Wastes shall comply with the standards specified in the Health (Radiation Safety) Regulations 1995 made pursuant to the provisions to the Health Act 1958.

123 1.5 Colour Waste which may, in the opinion of the authorised office cause unacceptable colour in the discharge from the authority’s waste water treatment plant shall not be discharged.

124 2. Chemical Characteristics

2.1 pH Value The pH value shall be within the range of 6.0 to 9.0.

2.2 Organic Strength The five days BOD concentration shall not exceed 600 mg/L. The COD demand concentration shall not exceed 1800 mg/L.

2.3 Nitrogen

The concentration of total Kjellkahl Nitrogen shall not exceed 400 mg/L.

2.4 Corrosive and Toxic Substances

a) The maximum allowable concentrations in milligrams per litre of corrosive and toxic substances shall be stated below:

Element Maximum Allowable Concentrations Milligram Per Litre

Arsenic 1 Cyanide as CN 5 Fluoride 10 Phenol & Chemical Derivatives of Phenol 50 (as Phenol) Sulphates 500 Sulphide as S 1 Sulphite as S 5 Thiosulphate as S 10

125 2.5 Metals The maximum allowable concentration in milligrams per litre of metals shall be as stated below.

Element Maximum Allowable Concentrations Milligram Per Litre

Aluminium 10 Beryllium 0.2 Boron as B 1.5 Cadmium 0.02 Chromium 0.20 Cobalt 0.10 Copper 2.0 Iron 4 Lead 1 Lithium 5 Manganese 0.4 Mercury 0.005 Molybdenum 0.05 Selenium 0.041 Silver 1 Nickel 0.4 Tin 5 Zinc 1

b) No waste which the Authorised Officer deems may be toxic to any person, to sewage treatment process of their authority, to the environment receiving treated effluent, or may be harmful to the composition of the sewer or other equipment comprising the sewerage system shall be discharged to a sewer or drain without the specific approval of the authorised officer.

126 Appendix 7.5

Specifications - Key Equipment for Good Receipt, Processing and Packaging

RECEIVING & UNLOADING EQUIPMENT, CAPACITY 200 CRATES/HR.

It shall receive the pallet box and tip the produce progressively into the receiving hopper of the line. It should be possible to unload the produce manually also into the receiving hopper from plastic crates of 600 x 400 x 250 mm high. Receiving hopper should be suitable for easy unloading of produce from minimum 200 plastic crates per hour manually.

FRUIT WASHER, CAPACITY 1.5 T/HR.

The soak tank made of SS - 304 with air blower and air distribution arrangements with nozzles for agitation of water and turning of fruit for proper washing. The soak tank shall be provided with inlet, outlet and drain with valves.

The pick-up conveyor with SS flights shall be provided with water spray arrangement for the final wash. At the discharge end hopper shall be provided for discharging the material on to inspection conveyor. The frame and supporting arrangements shall be made of mild steel.

INSPECTION / SORTING LINE, CAPACITY 1.5 T/HR.

Three way belt conveyor with side frame made of SS. It shall be provided with deflector baffles, cutting/coring tables made of wood fixed on SS frame. All parts coming in contact with product shall be made of SS and the stand made of mild steel. Waste disposal deflector shall be provided to divert the waste to a container. The conveyor shall be driven by geared motor with speed adjustment device.

The fruit shall be finally inspected on this conveyor and the cutting/coring/slicing/ de- skinning operations shall be carried out either automatically or manually as per operational convenience.

FRUIT CUTTING MACHINE, CAPACITY 1.5 T/HR.

This equipment shall be mainly used to cut above fruit and vegetable, mainly mango and lemon, into 4 to 12 pieces each. The machine should be automatic and suitable for in - line operations. The machine should be able to remove and separate the stone from the cut pieces of the green mango.

127 FRUIT SLICING/DICING MACHINE, CAPACITY 1.5 T/HR.

The machine should be automatic and suitable for in - line operations. The machine should be able to separate the stone from the cut pieces of the green mango. This equipment shall be mainly used to take out the slices in adjustable thickness from mango and cut them into small pieces.

ABRASIVE PEELER, CAPACITY 1.5 T/HR.

The machine should be automatic and preferably suitable for in - line operations. The machine should be able to separate the skin and stone from fruit to take out the pulp from mango.

BUCKET ELEVATOR, CAPACITY 1.5 T/HR.

Elevator buckets made of SS in pressed and welded construction. It shall have a SS drip chute at the back of the frame to avoid spillage on the floor and collection of material in feed hopper. SS outlet chute with diverted for connecting two different lines. The frame shall be made of mild steel. It shall be driven by geared motor.

PULPER, CAPACITY 1.5 T/HR.

The pulper consists of inlet feed hopper crushing chamber with seeing type blades and discharge chute. All contact parts made of SS 304. The mill is connected with electric motor belt and pulley. The motor and the mill are supported on mild steel.

BATCH MIXER WITH TILTING DEVICE, CAPACITY 0.5 T/BATCH AND SS TUBE SCREW CONVEYOR

This shall be in SS 316 construction with capacity to hold 500 Kg mix of the pickle. It shall be complete with low speed agitator (28 RPM). The design shall be such as to ensure uniform mixing of fruit / vegetable, spices, oil and chemicals. It shall have built in SS spray balls for CIP cleaning and shall be fitted with automatic tilting device for unloading the pickle mix to the hopper of the SS screw conveyor which would lift the prepared batch to the hopper of the filling machine.

STEAM KETTLE, CAPACITY 500 L

The kettle made of SS 304 with SS steam jacket. The kettle is insulated with glass wool and clad with SS sheet and supported on SS frame. It shall be provided with necessary inlet and outlet connection for the product and steam. It shall be fitted with low speed (38 RPM) stirrer assembly and geared motor.

128 SS PUMP, CAPACITY 1000 LPH, 15 MWC

Screw type positive displacement pump with all contact parts made of SS and food grade rubber. The pump is driven by directly coupled motor. The pump and motor is mounted on a common base frame.

SUGAR PREPARATION STATION, CAPACITY - 500 L

Kettle made of SS 304 with SS steam jacket. The kettle is insulated with glass wool and clad with SS sheet. The kettle is supported on mild steel frame. It shall be provided with necessary inlet and outlet connections for the product and steam. It shall be fitted with stirrer assembly and geared motor - capacity 500 L.

Sugar syrup storage tank having shell made of SS 304 2 mm thick plates with dished bottom and flat top with operable cover with handle. The tank shall be insulated with glass wool and cladded with SS sheet. The tank is supported on three legs made of milk steel and cladded with SS with adjustable SS ball feet. The tank shall be provided with inlet on top and outlet at bottom ending in union. It shall be provided with scraper type agitator and geared motor - capacity 500 L.

UNIVERSAL GRINDER FOR SPICES AND SUGAR, CAPACITY 100 KG/HR.

The system shall comprise the following components - Universal grinder with base plate body, with anvils, rotor with hammers, motor 5 HP - 2 pole and drive parts. Base plates and motor mounting frame in MS construction with inlet chute. Outlet ducting with bend and flanges between UG body and modular filter. - Compressed air filter 3 bag with shaking mechanism with GI body hopper and timer. - Airlock 15/15 with 1 HP motor and gear box. - Blower for modular filter with 2 HP motor. - Turbo sifter with rotor fitted with brush and screw assembly, sieve basket complete with inlet, outlet and overflow spout and with 2 HP motor and drive parts. - Ducting for sieve to universal grinder - Air compressor 6 CFM with 1 HP drive - Control panel with suitable incoming and outgoing feeders for above mentioned items without cables and electrical accessories.

129 BOTTLE BRUSHING AND WASHING MACHINE, 9000 BOTTLES/HR.

It shall be used for empty bottle washing and brushing i.e. for cleaning purpose and shall comprise completed brush assembly, SS tank, body frame and electrical drive unit.

SLAT CHAIN CONVEYOR, APPROX. 5 M Long

It shall be used for conveying the washed bottles to filler and shall be equipped with SS slat chain assembly, MS frame work, adjustable guides and electrical drive unit.

BOTTLE FILLER/CAPPER, 9000 BOTTLES/HR.

It shall be used for filling thick and semi solid mixtures like fruit and vegetable pickles (oil based), chutney, paste, sauces etc. into the empty glass bottles. The filling capacity offered by the machine should be adjustable between 250 g. to 500 g. which shall depend upon the type of product to be bottled.

It should be supplied along with rotary pump (oil filler) and also have attachment for lugs sealing of the cap on the bottle.

AUTOMATIC LABELLING MACHINE, 9000 BOTTLES/HR.

It shall be used for labelling requirement such as applying both wrap around and front patch label on different diameter bottles on the same machine. Accessory would include front coding unit, which can be used for printing wide variety of information on front side of the label such as date, batch etc.

TRAY PACKING/SHRINK WRAPING MACHINE, 1500 CRATES/HR.

It shall be used for group packing of product - filled bottles with provision to pack together six to twelve bottles in the tray. The size of the bottle would varying from 80 mm to 100 mm depending upon the quantity filled in the bottle, and these would be shrink wrapped and automatically stacked for transfer to finished product store.

130 Appendix 7.6

Specification - Service Equipment

1. STEAM RAISING PLANT - 1500 KG/HR

BOILER – 1,500 KG/HR

Boiler with the capacity to produce 1500 kg/hr of steam at 1000C at a pressure of 10 kg/cm2. The thermal efficiency of the boiler shall not be less than 85 per cent. The boiler shall be provided with fully automatic gas burner with air blower and feed water pump. The water feeding shall be fully automatically controlled.

The boiler shall have combustion chamber fitted with gas burner, steam generating section, pre-heating section and super heating section. It shall have dual safety valves, steam stop valve, pressure gauge, water level gauge and check valve. The control panel shall be fully wired with push buttons, contractors, relays and indication lamps.

A suitable gas storage tank with interconnections and controls for the steam raising plant shall also be provided as part of the steam generation system.

FEED WATER TANK - 5000 L

Vertical tank made of 5 mm thick mild steel sheet. The tank shall have 50 mm inlet, 50 mm outlet, 75 mm over-flow, float type level indicator, manhole with hinged cover. Air breather made out of 40 mm pipe with wire mesh and clamp.

WATER SOFTENER – 1,500 L/HR

One exchange type water softener to produce commercial zero hardness suitable for boiler feed water. The softener shall be provided with inlet and outlet connection and interconnecting pipes and fittings for normal operation and for regeneration of softener. It shall include salt solution preparation tank with dosing arrangement.

2. WATER SUPPLY SYSTEM – 7,500 L/HR

The system shall consist of one tank, one pump, air compressor and control panel. Horizontal tank shall have dished ends made of 10 mm thick mild steel with a capacity of 5,000 L. The tank shall be provided with 75 mm inlet, 75 mm outlet, 15 mm air connections with flange and counter flange, man way high and low level probes, pressure switch with setting range 2 to 8 kg/sq. cm and pressure gauge.

131 Centrifugal pump of 7,500 LPH with browse impeller and TEFC squirrel cage induction motor.

3. AIR SUPPLY SYSTEM – 40 CUBE MTR/HR

Air compressor 650 L/minute with a working pressure of 8 kg/sq.cm. the compressor shall be a complete package unit with receiver, compressor and motor mounted on a common base frame. It shall be provided with air outlet and pressure switch. The control panel shall be cubical type with wall mounting arrangement and provided with contractors, indication lamp. ON / OFF push button and controllers.

4. ELECTRICAL SUPPLY SYSTEM – 150 KVA

Floor mounting type motor control centres (switch boards) made of 14 gauge sheet. The cubicle - type switch board shall be front openable and all operations from the front. Cold rolled sheet shall be used for doors and front covers. The doors shall be hinged type. The switch board shall be totally enclosed, dust, weather and vermin proof.

The busbars shall be made of high conductivity electrolytic aluminium conforming to grade E91E of BIS 5082. These shall be provided with heat shrinkable insulating sleeve.

All power and control wiring inside the panel shall be with PVC insulated copper cable. All power and control wiring shall be brought to the cable alley and terminated in a terminal block.

The switch board shall have feeders for all the equipment requiring electrical connection and feeders for internal lighting.

132 Appendix 7.7

Raw Material and Ingredients for Manufacturing Pickle - 60 Tonnes

Ingredients Raw Materials Recovery Preserved Salted Sliced F&V Total Qty. (Kg) (%) (Kg) Fruit Salt Approx. For Batch Mix Content 10% Fruits & Vegetables Mango 24,092 65 15,660 1,740 17,400 Lemon 11,709 95 11,124 1,236 12,360 Chilli – Green 3,553 95 3,375 375 3,750 Kerda 711 95 675 75 750 Ginger 426 95 405 45 450 Lotus Stem 2,132 95 2,025 225 2,250 Carrot 3,197 95 3,037 338 3,375 Karonda 497 95 472 53 525 Jack Fruit 591 80 473 52 525 Spices Asafoetida 59 97 57 Black Cumin Powder 74 95 71 Coriander 316 95 300 Cumin Powder 291 95 276 Fennel Powder 386 95 367 Fennel Whole 375 98 367 Fenugreek Seeds 1,117 98 1,095 Fenugreek Whole 383 98 375 Red Chilli Powder 1,609 95 1,529 Turmeric Powder 205 95 195 Mustard Yellow 1,316 98 1,290 Chemicals & Oils Acetic Acid (100% Pure) 363 100 363 Citric Acid (Dry Crystals) 72 100 72 Lactic Acid (Liquid) 63 100 63 Iodised Salt 3,510 100 3,510 (After Lab Test) - 14% Black Salt 87 100 87 Canola Oil 3,963 100 3,963 Pickle Solution (Water) 2,130 100 2,130 Sugar 2,637 95 2,505 TOTAL 65,864 60,000

133 Appendix 7.8

Raw Material and Ingredients for Manufacturing Mango Chutney - 240 Tonnes

Ingredients Raw Material Recovery (%) Hot Chutney Sweet Chutney Total Qty. (Kg) After Sorting & (Kg) (Kg) (Kg) Cleaning

Fruits & Vegetables Prepared Mango Slices 200,000 60 60,000 60,000 120,000

Spices Garlic Powder 253 95 120 120 240 Ginger 245 98 120 120 240 Ginger Powder 253 95 120 120 240 Red Chilli 505 95 360 120 480

Chemicals & Oil Acetic Acid 2,040 100 1,200 840 2,040 Sugar 122,905 95 58,080 58,680 116,760

TOTAL 326,201 120,000 120,000 240,000

Hot Chutney = 120 Tonnes Sweet Chutney = 120 Tonnes

134 Appendix 7.9

Raw Material and Ingredients for Manufacturing Curry Paste - 180 Tonnes

Ingredients Raw Material Recovery (%) Tandoori Paste Tikka Paste Total Qty (Kg) After Grinding & (Kg) (Kg) (Kg) Cleaning

Spices Black Pepper 3,571 98 1,000 2,500 3,500 Cardamom 2,736 95 600 1,999 2,599 Cinnamon 1,684 95 600 1,000 1,600 Cloves 1,684 95 600 1,000 1,600 Coriander Seeds 40,000 98 19,200 20,000 39,200 Cumin 29,473 95 8,000 19,999 27,999 Fenugreek Seeds 7,040 98 4,399 2,500 6,899 Garlic Powder 3,571 98 2,000 1,500 3,500 Ginger 4,081 98 1,999 1,999 3,998 Onion 9,000 90 3,600 4,500 8,100 Red Chilli 15,052 95 6,800 7,499 14,299 Salt 11,836 98 5,600 5,999 11,599 Turmeric Powder 17,263 95 6,400 10,000 16,400

Chemicals & Oils Acetic Acid 4,660 100 2,160 2,500 4,660 Red Colour 240 100 240 - 240 Water 16,800 100 16,800 - 16,800 Canola Oil 17,000 100 - 17,000 17,000

TOTAL 185,691 79,998 99,995 179,993

Tandoori Paste = 80 Tonnes Tikka Paste = 100 Tonnes

135 Appendix 7.10

Raw Material and Ingredients for Manufacturing Curry Sauce - 60 Tonnes

Ingredients Raw Materials Recovery (%) Total Qty. (Kg) After Grinding & For Batch Mix Cleaning (Kg)

Fruit Tamarind 18,000 50 9,000

Spices 100 kg Extract prepared from 100 60,000 - Cinnamon 250 g 150 - Cardamom 750 g 450 - Clove 250 g 150 - Cumin 500 g 300 - Fennel 250 g 150 - Acetic acid 4 kg 2,400 - Water 94 kg 56,400

Chemicals & Oils Acetic acid 300 100 300 Salt 5,100 100 5,100 Thickening agent comprising 600 100 600 - Sodium aginate 200 g - Guar gum 200 g - Corn starch 600 g Sugar syrup 10% 3,000 100 30,000 Jaggery 9,183 98 9,000 TOTAL 96,183 114,000

136 Appendix 7.11

Raw Material Requirements – Plant Capacity 540 Tonnes Ingredients Pickle Chutney Paste Sauce Total Cost/Kg Total Cost (Kg) (Kg) K (Kg) (Kg) (Kg) ($) ($) g Fruits & Vegetables Mango 24,092 200,000 224,092 1.00 224,092.00 Lemon 11,709 11,709 0.60 7,025.40 Chilli – Green 3,553 3,553 2.50 8,882.50 Kerda 711 711 5.00 3,555.00 Ginger 426 426 3.00 1,278.00 Lotus Stem 2,132 2,132 5.00 10,660.00 Carrot 3,197 3,197 1.00 3,197.00 Karonda 497 497 5.00 2,485.00 Jack Fruit 591 591 5.00 2,955.00 Tamarind 18,000 18,000 3.00 54,000.00 Spices Asafoetida 59 59 13.00 767.00 Black Cumin 74 74 3.50 259.00 Black Pepper 3,571 3,571 12.27 43,816.17 Cardamom 2,736 450 3,186 7.31 23,289.66 Cinnamon 1,684 150 1,834 4.63 8,491.42 Chilli (Red) 1,609 505 15,052 17,166 2.44 41,885.04 Cloves 1,684 150 1,834 3.63 6,657.42 Coriander 316 40,000 40,316 1.75 70,553.00 Cumin 291 29,473 300 30,064 3.50 105,224.00 Fennel Whole 375 375 2.44 915.00 Fennel Powder 386 150 536 2.44 1,307.84 Fenugreek 1,500 7,040 8,540 0.94 8,027.60 Ginger Fresh 245 4,081 4,326 3.75 16,222.50 Ginger Powder 253 253 3.75 948.75 Garlic Powder 253 3,571 3,824 3.50 13,384.00 Onion 9,000 9,000 2.00 18,000.00 Turmeric 205 17,263 17,468 1.63 28,472.84 Mustard Yellow 1,316 1,316 2.40 3,158.40 Chemicals & Oils Acetic Acid 363 2,040 4,660 2,700 9,763 1.73 16,889.99 Citric Acid 72 72 2.36 169.92 Lactic Acid 63 63 2.89 182.07 Iodised Salt 3,510 11,836 5,100 20,446 0.28 5,724.88 Black Salt 87 87 5.00 435.00 Canola Oil 3,963 17,000 20,963 1.70 35,637.10 Sugar 2,637 122,905 3,000 128,542 0.65 83,552.30 Jaggery 9,183 9,183 5.00 45,915.00 Thickening Agent 600 600 10.00 6,000.00 Pickle Solution 2,130 16,800 56,400 75,330 0.15 11,299.50 Red Color 240 240 10.00 2,400.00 TOTAL 65,864 326,201 185,691 96,183 673,939 $917,715.30

137

138 Appendix 7.12

Raw Materials for Producing 60 Tonnes of Pickles

Ingredients Raw Materials Cost Per Kg. Total Cost (Kg) ($) ($)

Fruits & Vegetables Mango 24,092 1.00 24,092.00 Lemon 11,709 0.60 7,025.40 Chilli – green 3,553 2.50 8,882.50 Kerda 711 5.00 3,555.00 Ginger 426 3.00 1,278.00 Lotus stem 2,132 5.00 10,660.00 Carrot 3,197 1.00 3,197.00 Karonda 497 5.00 2,485.00 Jack fruit 591 5.00 2,955.00

Spices Asafoetida 59 13.00 767.00 Black Cumin 74 3.50 259.00 Coriander 316 1.75 553.00 Cumin 291 3.50 1,018.50 Fennel Powder 761 2.44 1,856.84 Fenugreek 1,500 0.94 1,410.00 Chilli (Red) 1,609 2.44 3,925.96 Turmeric 205 1.63 334.15 Mustard Yellow 1,316 2.40 3,158.40

Chemicals & Oils Acetic acid 363 1.73 627.99 Citric acid 72 2.36 169.92 Lactic acid 63 2.89 182.07 Iodised salt 3,510 0.28 982.80 Black salt 87 5.00 435.00 Canola Oil 3,963 1.70 6,737.10 Pickle solution (water) 2,130 0.15 319.50 Sugar 2,637 0.65 1,714.05 TOTAL 65,864 $88,581.18

139 Appendix 7.13

Raw Materials for Producing 240 Tonnes of Chutney

Ingredients Raw Materials Cost Per Kg. Total Cost (Kg) ($) ($)

Fruits & Vegetables Mango for slicing 200,000 1.00 200,000.00

Spices Garlic 253 3.50 885.50 Ginger 245 3.75 918.75 Ginger Powder 253 3.75 948.75 Chilli (Red) 505 2.44 1,232.20

Chemicals & Oils Acetic acid 2,040 1.73 3,529.20 Sugar 122,905 0.65 79,888.25 TOTAL 326,201 $287,402.65

140 Appendix 7.14

Raw Materials for Producing 180 Tonnes of Curry Paste

Ingredients Raw Materials Cost Per Kg Total Cost (Kg) ($) ($) Fruits & Vegetables Nil Nil Nil

Spices Black Pepper 3,571 12.27 43,816.17 Cardamom 2,736 7.31 20,000.16 Cinnamon 1,684 4.63 7,796.92 Cloves 1,684 3.63 6,112.92 Coriander Seeds 40,000 1.75 70,000.00 Cumin 29,473 3.50 103,155.50 Fenugreek Seeds 7,040 0.94 6,617.60 Garlic 3,571 3.50 12,498.50 Ginger 4,081 3.75 15,303.75 Onion 9,000 2.00 18,000.00 Chilli (Red) 15,052 2.44 36,726.88 Turmeric Powder 17,263 1.63 28,138.69

Chemicals & Oils Acetic acid 4,660 1.73 8,061.80 Salt 11,836 0.28 3,314.08 Red colour 240 10.00 2,400.00 Water 16,800 0.15 2,520.00 Canola Oil 17,000 1.70 28,900.00 TOTAL 185,691 $413,362.97

141 Appendix 7.15

Raw Materials for Producing 60 Tonnes of Curry Sauce

Ingredients Raw Materials Cost Per Kg. ($) Total Cost (Kg) ($)

Fruits Tamarind 18,000 3.00 54,000.00

Spices (Extract – 100 kg Solution) - Cinnamon 250 g 150 4.63 694.50 - Cardamom 750 g 450 7.31 3,289.50 - Clove 250 g 150 3.63 544.50 - Cumin 500 g 300 3.50 1,050.00 - Fennel Powder 250 g 150 2.44 366.00 - Acetic acid 4 kg 2,400 1.73 4,152.00 - Water 94 kg. 56,400 0.15 8,460.00

Chemicals & Oils Acetic acid 300 1.73 519.00 Salt 5,100 0.28 1,428.00 Thickening agent comprising 600 10.00 6,000.00 - Sodium aginate 200 g - Guar gum 200 g - Corn starch 600 g Sugar 3,000 0.65 1,950.00 Jaggery 9,183 5.00 45,915.00 TOTAL 96,183 $128,368.50

142 Appendix 7.16

Costs of Packaging Material

Item Cost of 500 Gms Converted to Packing in Glass 1 Kg Product Bottle ($) ($) Glass Bottle with Cap 0.12 0.24 Label 0.03 0.06 Pilfer - Proof Neck 0.03 0.06 Wrapping/Sealing Carton (12 Bottles) 1.20 0.20 Carton Sealing Tape 0.02 0.02 TOTAL $0.58

Total Cost for Packaging 540 Tonne of Product $313,200

143 Appendix 7.17

Specifications, Spices

CARDAMOM AMOMUM (whole)

Dried nearly ripe fruit of Amomum subulatum Roxb. in the form of capsules. The proportion of calyx pieces, stalk bits and other extraneous matter shall not exceed 5 per cent by weight. The cardamom seeds obtained from the capsules shall contain not less than 1 per cent of volatile oil.

CINNAMON (whole)

Dried pieces of the inner bark of Cinnamomum zeylanicum Blume. It shall not contain foreign vegetable or colouring matter. It shall contain not less than 0.5 per cent of volatile oil.

CUMIN (whole)

Dried seeds of Cuminum cyminum. The proportion of extraneous matter including dust, stones, lumps of earth, chaff, steam or straw shall not exceed 7 per cent by weight. The proportion of edible seeds other than cumin seeds shall not exceed 5 per cent by weight.

CLOVE (whole)

Dried, unopened flower buds of Eugenia Caryophyllus (C. Sprengel) Bullock and Harrison. Inorganic extraneous matter shall not exceed 0.5 per cent by weight and the organic extraneous matter, including vegetable matter of plants other than cloves, tendril cloves, mother cloves or other matters of plants of cloves shall not exceed 2 per cent by weight. The amount of insect damaged clove shall not exceed 1 per cent by weight. The cloves shall contain not less than 15 per cent of volatile oil. It shall be free from added colouring matter.

GINGER (whole)

Rhizomes of Zingiber officinale Rose in pieces irregular in shape and size with peel not entirely removed, washed and dried in the sun. The proportion of extraneous matter shall not exceed 2 per cent by weight. It shall contain, on dry basis, not less than 1 per cent of volatile oil. If the ginger is limed, the lime content shall not exceed 4 per cent by weight.

BLACK PEPPER (whole)

Dried berries of Piper nigrum L. brown to black in colour with wrinkled surface. The proportion of extraneous matter including dust, stalks, leafy matter and other foreign

144 matter shall not exceed 3 per cent by weight. The proportion by weight of light berries and pinheads shall not exceed 10 per cent and 4 per cent respectively.

FENUGREEK (whole)

Dried seeds of Trigonella foenum-groacum L. The proportion of extraneous matter including dust, dirt, stones, lumps of earth, chaff, stem or straw shall not exceed 5 per cent by weight. The proportion of edible seeds other than fenugreek shall not exceed 5 per cent by weight.

BISHOP SEEDS

Dried ripe seeds of Trachyspernum ammi sprague. The proportion of organic and inorganic extraneous matter shall not exceed 3 per cent and 2 per cent respectively (by weight). The seeds shall be free from living insects, insect fragments and rodent contamination visible to the eyes.

FENNEL SEEDS

Dried ripe fruits of Foeniculum vulgare mill. The proportion of extraneous matter including dust, dirt, stones, lumps of earth, chaff, stem or straw shall not exceed 5 per cent by weight. The proportion of edible seeds other than fennel shall not exceed 5 per cent by weight.

CORIANDER SEEDS

Dried mature fruits of Coriandrum sativum (L). The proportion of extraneous matter including dust, dirt, stones, lumps of earth, chaff, stalk, stem or straw, edible seeds of fruits other than coriander and insect damaged seeds shall not exceed 8 per cent by weight.

MUSTARD SEEDS

Dried seeds of Brassica alba (L). Boiss, Brassica compestris L. var. dichotoma, Brassica compestris L.var. (yellow sarson), Syn Brassica compestris L. var glauca, Brassica compestris L. var. (Toria), Brassica juncea (L.) Coss-et Czern and Brassica nigra.(L.) Koch. The proportion of extraneous matter which includes dust, dirt stones, lumps of earth, chaff, stem, straw, edible foodgrains, edible oilseeds of any other variety or any other impurity shall not exceed 7 per cent by weight. It shall be free from seeds of Argemone maxicana Linn.

ASAFOETIDA

Means the oleogumresin obtained from the rhizome and roots of Ferula alliaces, Ferula rubricaulis and other species of Ferula. It shall not contain any colophony resin, galbonum resin, ammoniaccum resin or any other foreign resin. It shall confrom to the following standards:

145 Total ash content shall not exceed 15 per cent by weight

Ash insoluble in dilute hydrochloric acid shall not exceed 2.5 per cent by weight.

The alcoholic extract shall not be less than 12 per cent as estimated by the USP 1936 method.

BLACK CUMIN (whole)

Seeds of Nigella sativa L. The proportion of extraneous matter including dust, dirt stones, lumps of earth, chaff, stem or straw shall not exceed 7 per cent by weight. The proportion of edible seeds other than cumin black shall not exceed 5 per cent by weight.

TURMERIC (whole)

Dried rhizome or bulbous roots of the plant of Curcuma longa L. It shall be free from lead chromate and other artificial colouring matter. The proportion of extraneous matter shall not exceed 2 per cent by weight.

146 Appendix 7.18

Specifications: Other Ingredients and Additives

CANOLA OIL

Oil extracted from canola. It shall be clear, free from rancidity, suspended or foreign matter, separated water, added colouring or flavouring substances.

ACETIC ACID

Glacial, colourless, pungent flavour, liquid in form and should solidify at 00C. Purity should not be less than 99 per cent.

LACTIC ACID

Colourless, odourless and liquid in form. Purity should not be less than 90 per cent.

CITRIC ACID

White in colour, odourless, crystalline and soluble in water. Purity should not be less than 99 per cent in anhydrous form.

SUGAR

Crystallised product obtained from sugarcane or sugar beet. It shall be clean and free from added colouring matter. Extraneous matter shall not exceed 0.1 per cent by weight.

SALT (Iodised)

Dry, refined salt (sodium chloride) produced in accordance with good manufacturing practice under a quality system. Containing greater than 45 mg/kg of iodine added as potassium iodate. Purity 99.4 per cent minimum, moisture 0.2 per cent maximum, water insolubles 0.05 per cent maximum.

JAGGERY

Obtained by boiling or processing juice pressed out of sugarcane or extracted from palmyra palm, date palm or coconut palm.

147 RAW MANGO (Dried)

Dried, wholesome, edible part of raw mango fruit with or without the outer skin. It shall be free from fungus, moulds and insect infestation, rodent contamination, added colouring, flavouring matter. It shall not contain any preservative except edible common salt that may be added to the extent of 5 per cent by weight on dry basis. It shall have characteristic taste and flavour. The proportion of extraneous substance shall not exceed 4 per cent by weight out of which inorganic matter shall not exceed 2 per cent by weight.

148 Appendix 7.19

Details of Built Up Areas and Estimated Cost

Section Area Total Area Height $Rate/ Total Cost ($) (Sq Mtr) (Sq Mtr) (Mtr) Sq Mtr

Production Block 1600 Industrial/Pre Fab. Reception 200 6 650 130,000 Raw Mat. Storage 300 6 650 195,000 Processing 200 6 650 130,000 Packaging 100 6 650 65,000 Finished Store 200 6 650 130,000 Despatch Section 100 6 650 65,000 Utilities Section 200 6 650 130,000 Electrical Room 50 4.5 575 28,750 Laboratory 100 4.5 650 65,000 Offices/Other Areas 150 4.5 600 90,000 Sub Total (A) $1,028,750

Administration Block 185 Pre Fab GM Office 25 3 1200 30,000 Finance Section 40 3 1200 48,000 Proc. Section 40 3 1200 48,000 Mktg. Section 40 3 1200 48,000 Computer Section 40 3 1200 48,000 Sub Total (B) $222,000

Road & Land Devlt. Internal Roads L.S. L.S. L.S. 100,000 Factory Gate 10 3 1000 10,000 Boundary Wall L.S. 2 L.S. 50,000 Land Devlt.(Hort.) L.S. L.S. L.S. 50,000 Effluent Plant L.S. L.S. L.S. 95,000 Water Supply System L.S. L.S. L.S. 190,000 Sub Total (C) $495,000

TOTAL (A+B+C) $1,745,750

Note: Cost of land not considered – to be made available free (Melton) Source: Western Water; Vaughan Constructions

149 Appendix 7.20

Plant and Machinery

Equipment Capacity Nos. Cost ($'000)

RECEPTION SECTION Receiving and unloading equipment 200 Crates/Hr 1 12.00 Fruit washer 1.5 T/Hr 1 65.00 Inspection/Sorting line 1.5 T/Hr 1 32.50

PROCESSING SECTION Fruit cutting/slicing/dicing machine (continuous type) 1.5 T/Hr 1 57.90 Abrasive peeler 1.5 T/Hr 1 17.00 Bucket elevator(movable type) 1.5 T/Hr 1 22.80 Weighing conveyor for fruit 1.5 T/Hr 1 21.50 Tipping station for preserved fruit 1.5 T/Hr 1 24.00 Transfer conveyor 1.5 T/Hr 1 9.00 Washing station & SS mesh conveyor 1.5 T/Hr 1 48.00 Sorting conveyor and platform Lot 1 28.00 Weighing station Lot 8.00 Ribbon mixer for pickle 0.5 T/Batch 2 70.00 SS tube conveyor 1.5 T/Hr 2 15.00 Steam kettle 500 L 2 100.00 Jacketed holding tank 1000 L 1 43.00 Oil storage tanks 2000 L 4 40.00 Sugar syrup preparation line 500 Kg/Batch 1 5.00 CIP Station 5000 LPH 1 100.00 Ingredient storage and weighing system 500 Kg/Hr 1 175.00 Universal grinder for spices 100 Kg/Hr 1 50.00

FILLING AND PACKAGING SECTION Tube in Tube heat exchanger 2.0 T/Hr 1 40.00 Bottle washer and steriliser 9000 BPH 1 6.00 Slat chain conveyor 5 M Long 1 1.00 Twin piston pump 9000 BPH 1 50.00 Bottle filler/capper 9000 BPH 1 10.00 Cooling tunnel 9000 BPH 1 170.00 Cooling tower & piping 5000 LPH 1 20.00 Automatic labelling machine 9000 BPH 1 70.00 Shrink wrapping machine 1500 CPH 1 25.00 S.S. Product piping Lot 1 35.00

150 Appendix 7.20 (Cont..)

SERVICES Steam raising plant comprising: 1500 Kg/H. 1 104.00 · Steam boiler with chimney · LPG service tank · Feed water tank · Water softener · Inter – connecting pipes, valves and fittings Water supply system comprising: 7500 LPH 1 15.00 · Water reservoir · Hydro flow system · Inter – connecting pipes, valves and fittings Air supply system comprising: 40 M3/Hr 1 10.00 · Air compressor · Air receiver · Inter – connecting pipes, valves and fittings Electrical supply system comprising: 150 KVA 1 85.00 · Motor control centres · Instrument and controls · Electrical cables for power & control · Earthing network · Internal electrification and lighting Waste disposal system comprising: · Solid waste handling ( Garbage ) 1 7.00 · Liquid waste handling ( ETP ) 1 8.00 Miscellaneous. Equipment comprising: · Electrical forklift 1 20.00 · Battery charging equipment 1 7.50 · Telephone and instruments 1 7.00 · Computer system 1 15.00 . Laboratory equipment Lot 50.00 · Office equipment Lot 50.00 · Vehicles 2 6.00 · Pallets and racks 750 25 18.75 · Poly jars/barrels 200 Kg 3000 115.00 · Weigh Scales 1, 100, 200 Kg 3 20.00

TOTAL $1,908.95

151 Appendix 7.21

Wholesale Price of Finished Products in Glass Bottles

Product Qty Unit Cost/Tonne Total Value (Tonne) ($) ($) Pickles 60 8,260 495,600 Chutney 240 6,640 1,593,600 Paste 180 7,500 1,350,000 Sauce 60 5,160 309,600 TOTAL 540 $3,748,800

* Assumption: 50% of retail price at Coles Express (Elizabeth Street)

152 Appendix 7.22

Costs of Fuel, Power, Water and Other Utilities

GAS

• Consumption per annum - 307.68 MJ • Rate - $78/MJ • Total Cost (A) - $23,999

ELECTRICITY

• Consumption per annum - 184,800 KWH • Rate - $0.15/KWH • Total Cost (B) - $27,720

WATER

• Consumption per annum - 11,000 KL • Rate - $0.65/KL • Total Cost (C) - $6,600

WASTE DISPOSAL (LIQUID)

• Rate - $348/Month • Total Cost (D) - $4,176

SOLID WASTE

• Rate - $536/Month • Total Cost (E) - $6,433

TOTAL COST (A+B+C+D+E) - $68,928

MJ – megajoules KL – kilolitres KWH – kilowattt/Hr

153 Appendix 7.23

Personnel Cost

Section Persons Level Annual Salary ($) Receiving & Dispatch 2 1 72,800 (1 PT + 1 FT) Production Technician 5 1 162,500

Maintenance Technician 1 2 52,000

Food Technologist 1 2 49,400

Administration, Accounts & Sales 3 2 109,200 (2 PT + 1 FT) Factory Manager 1 3 71,500

TOTAL 13 $517,400

PT = Part-time FT = Full-time

154 Chapter 8: Findings and Conclusions

Suku Bhaskaran

8.1 Project Overview

The objective of the study was to analyse the viability of starting up an import - replacing and export-oriented industry to manufacture curry sauces, curry pastes, chutney and pickles. It was postulated that this industry would benefit the producers of ‘new’ crops such as mangoes, lemons, ginger, spices, cashews and almonds. The study entailed assessing market opportunities in Australia, identifying opportunities for exporting these products, evaluating the activities of international competitors and the impact this could have on an Australian based industry and, finally, undertaking a pre- feasibility analysis of the cost and returns from establishing a production facility in Australia. The pre-feasibility analysis is based on several assumptions. The research team has assessed these assumptions through extensive consultations with key informants in various industry sectors (raw material suppliers, suppliers of ingredients, equipment suppliers, building contractors, retailers, importers and manufacturers of sauces and pastes) and is satisfied that these assumptions are realistic. The project pre-feasibility is based on starting up a small-scale greenfield production facility in Melbourne. It would seem that a strong export market focus targeting the UK, Europe, USA and the Middle East would enable the start-up of several such production facilities in Australia. An alternative would be for manufacturers of other varieties of sauces and pastes to extend their product-line through introducing South Asian varieties of culinary products. This would, of course, mean that production could be started up without the level of capital and operating expenditure that is estimated in this study.

8.2 Summary - Key Elements of the Project

Analyse trends in the imports of curry sauces, curry pastes, chutney and pickles into Australia.

Identify and review trends in different product-market segments (consumers of these products, resellers of these products and the food service business).

Examine and evaluate the activities of importers, distributors and manufacturers of South Asian culinary products in Australia.

Examine and evaluate the activities of Australian based manufacturers of Western- type and East Asian sauces and pastes.

Identify sources of raw materials and ingredients purchased in Australia, and evaluate product suitability, product availability and price competitiveness of these raw materials and ingredients.

155 The review of the Australian market was followed by an analysis of the product market in the United Kingdom, India, Malaysia and Singapore. The review of the market in the UK included case study analysis of Patak’s and Sharwood’s, the two major exporters of South Asian culinary products to Australia. The reasons for selecting these markets for review were as follows:

The United Kingdom is the largest international market for these products and is the principal source of imports of these products to Australia. The South Asian culinary products market in the UK in 1997 was estimated to be (in retail sales value) $600 million.

India is a major producer of the raw materials (spices, mangoes, lemons and cashews) for these products and as these products are used for cooking Indian- type meals, it was assumed that Indian manufacturers could have some competitive advantages in manufacturing these products.

Malaysia and Singapore were included in the analysis because nearly two million persons of Indian ancestry live in these countries. It was assumed that demand from this community could generate significant export opportunities to Malaysia and Singapore.

8.3 Summary – Key Findings

Market Trends - Australia

Sales of South Asian culinary products have increased substantially and progressively.

In 1998 the retail sales value increased to $38 million.

Sales through supermarkets account for 29 per cent ($11.05 million in retail sales value) of total product category sales.

More than 90 per cent of South Asian culinary products sold in supermarkets are imported from the UK.

South Asian Stores (ethnic stores owned by migrants from the Indian sub- continent) and Food Service Outlets (Indian restaurants) are important markets for these products. South Asian Stores were estimated to account for 44 per cent of the total sales of this product category and Food Service Outlets were estimated to account for 25 per cent of the total sales of this product category.

There is a major divide in product and brand choices in the three market segments: Supermarkets, South Asian Stores and Food Service Outlets. ¾ Brands from the UK especially Patak’s and Sharwood’s dominate the Supermarket segment. Products from India (especially Ashoka and Pachranga) are dominant in South Asian Stores and Food Service Outlets. ¾ Curry sauces are the most important product line in supermarkets, chutneys are the most important product line in food service outlets and pickles are the most important product line in South Asian stores.

156 Product-Market Opportunities - Australia

Product-market trends in countries such as the UK suggest that demand in the mainstream market would increase as suppliers introduce products with sensory and packaging attributes that satisfy the needs of various market segments.

Experience in the UK suggests that the sales of South Asian culinary products in supermarkets would increase as second and third generation migrants from the Indian sub-continent shift their purchase of these products from ethnic grocery stores to supermarkets.

South Asian culinary products are a new product introduction in the mainstream market. The UK experience suggests that as consumers become more familiar with this cuisine the demand for these products would increase.

Developments in the market place such as health concern and the shift by segments of the population to vegetarianism, increasing demand for marinades, the popularity of all-season barbecues and increasing demand for ready-to-eat meals would have positive influences on the demand for these products.

Product-Market Opportunities - Exports

The UK market review and the case studies on Patak’s and Sharwood’s suggested that there is potential to expand sales into the UK and the USA. In the UK there appear to be opportunities to expand sales into the food service segments. Patak’s and Sharwood’s are in the early stages of their market development programs in the USA and Europe. A case study on Patak’s (Jakubowski, 1995) reports that the company focuses strongly on the European market. Jakubowski contends that Patak’s has delineated the European market into three geographical clusters and developed product-lines and labelling to satisfy the requirements of these three product markets. These three geographical clusters are:

¾ Spanish/Italian/Scandinavian markets (slightly reserved with regard to Indian food).

¾ German/Benelux markets (slightly more adventurous, showing greater interest in ethnic foods in general).

¾ French/English markets (generally, ethnic foods are well accepted and basic Indian food concepts are recognised by large segments of the population).

The review of the industry in India indicated that there are significant export opportunities (especially of chutneys and pickles) to countries such as the United Arab Emirates, Saudi Arabia and Kuwait. In 1994-95 these three countries imported about 3,000 tonnes of pickles and chutneys from India. Other important markets for exports of pickles and chutneys from India include the UK (4,365 tonnes) and USA (1,487 tonnes).

157

COMPETITIVE THREATS

Indian companies in this sector are unlikely to be major competitive threats to the Australian industry. This sector in India is dominated by small-scale enterprises that have not invested in modern production processes or in developing their brand positions.

The Indian government is encouraging fruit and vegetable processing companies in India to adopt strategic alliances with international companies. This has encouraged fruit and vegetable processors in India to manufacture minimally processed products such as tomato puree, tomato paste and pickled gherkins.

Some multinational companies in India have introduced a range of South Asian culinary products. These companies seem to be targeting sales to the more affluent segments of the Indian population. The large and expanding domestic market in India could mean that these companies are unlikely to focus on the export market.

It would appear that the major international competitors to Australian companies would be Patak’s and Sharwood’s.

PROJECT VIABILITY and PROFITABILITY

Most raw materials (mangoes, lemons, spices, cashews and almonds) for manufacturing the product-lines reviewed in this study can be competitively purchased in Australia. The product varieties are appropriate. Seasonality in production would not create problems because the raw materials (especially mangoes and lemon) have to be cured and preserved in salt solution prior to being processed.

A modern but small-scale green field project is estimated to cost $3.76 million.

If the production facility operates at 50 per cent capacity and achieves a 17 per cent penetration (sales turnover: $3,748,800) of the domestic market, it could generate a net operating profit (before tax and interest) of $0.84 million.

If the production facility operates at full capacity and achieves a 34 per cent penetration (sales turnover: $7,497,600) of the domestic market, it could generate a net operating profit (before tax and interest) of $2.89 million.

These production levels are based on a single shift operation and, therefore, there is substantial scope for scaling-up the operation.

The pre-feasibility study suggests that a viable industry that targets the domestic and international markets can be developed in Australia.

158 Selected References

Amanda, R. 1994. ‘Sharwood’s Bid to Halt Patak’s, Marketing (24 September), p. 5.

‘Authentic Foods Widens Range’. 1992. Frozen Chilled Foods, 46 (11), pp. 20, 23.

‘Balti Pans for Ethnic Gold’. 1994. The Grocer, 216 (9 July), p. 39.

Bateman, M. 1996. ‘Chutneys for Relishing’. Independent on Sunday (18 August), pp. 42-44.

Bhaskaran, S., and Irwin, P. 1995. Review of Market Potential for Indigenous Dairy Desserts in India. Rural Industries Research and Development Corporation Research Paper No. 95/6, Canberra.

Bhaskaran, S., and Sillitoe, J. 1995. The Consumption of Red Meat in Socio-Demographic Segments of Peninsular Malaysia, Meat Research Corporation, Sydney.

Bhaskaran, S., and Sharma, S. 1996. ‘Socio-Demographics in Export Market-Evaluation – An Analysis of Dairy Food Consumption in Malaysia’. Paper presented at 1996 Australian Marketing Educator’s Conference, Adelaide 7-9 February.

Braithwaite, P. 1992. “Taste of India for Non Ethnics’, Supermarketing (11 December), p. 36.

Campbell, K., and Fisher, B. 1991. Agricultural Marketing and Prices, Third Edition, Longman Cheshire, Melbourne.

Castles, I. 1996. Year Book Australia 1995, Australian Government Publishing Service, Canberra, pp. 479-483.

Cathy, B. 1995. ‘ Pragmatist Takes the Spice Trail’, Marketing (16 March), p. 20.

Centre for International Economics. 1992. Food Processing, R & D Opportunities for RIRDC to Fund in Food Processing, Rural Industries Research and Development Corporation, Canberra.

Centre for Technology and Social Change. 1990. Innovation and Competitiveness in the Australian Processed Food Industry, Department of Industry, Technology and Commerce, Canberra.

Chorida Food Products Limited. 1997. 14th Annual Report 1995-96. Pune, India.

Fahey, K., and Prinsley, R. 1993. Asian Foods Research and Development, Report on a Strategic Planning Workshop, Rural Industries Research and Development Corporation, Canberra.

Fabricant, F. 1994. ‘Indian Food Ready for Mainstream’. Nation’s Restaurant News, 28 (31), p. 29.

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