Categories
Food Processing Strategy

10 major reasons of business failure in food processing sector

When it comes to business, food processing seems to be an obvious choice for most of the entrepreneurs. There could be a considerable number of reasons for this apparent choice. Some of the prominent ones could be:

  1. Our exposure to a range of food available in our vicinity and our food consumption habits.
  2. Media speaks a lot about food losses and food wastage in the developing and developed world.
  3. A latent and unsatisfied demand because of demand-supply mismatch.
  4. Entry of new product lines or brands in the market on a regular basis.

Despite of so much of an unmet demand and huge requirements of food for consumption, it’s difficult to understand why food processing or food related businesses fails. During the research, there were some interesting facts which came across and 10 major ones are discussed below with the list of companies who were failed in the process:

1. Raw material availabilityAngas Parkwas was active in the dried fruit processing business with its operations in the souther Australia. Due to decrease in the number of big dried fruit growers, they were forced to produce less, which further led to the closure of the unit.

2. Cheaper imports:

McCain Foods (Australia)was forced to close its potato processing plant because of cheaper imports of finished products. Input costs (potatoes, labor and electricity) were steadily increasing for potato processing and that led to surplus capacity and higher unit costs compared to the imported products. Losing competitiveness on unit economics and low prices of imported products made McCain unit unviable to sustain in the long term.

Rol-Land Farms Group (US)group was active in mushroom processing business in Freetown, US. Increased labor and raw material costs with fall in margins due to market competition made mushroom  processing unprofitable, further leading to the closure of plant.

3. Regulatory environment: Heinz was manufacturing tomato ketchup, baby foods, BBQ sauce and other products in Ontario, Canada. Canada passed more stringent water and labor regulations leading to spike in prices of raw material. Neighbouring countries with less stringent norms like Chile and US had cost competitiveness over the domestic produce. This made Heinz products unviable and led to the closure of a 104 year old plant. Though this blow made Canadian authorities to think of a national food strategy to ensure Canadians have access to fresh Canadian products but it was too late.

4. Margins: Morrisons, Bos Brothers Fruit & Vegetables BV (a part of WM Morrisson Supermarket, the Netherlands) was into international trade in fruit, vegetables, flowers and plants. They were forced to terminate the company because of stiff competition from discounters like Aldi and Lidl.

5. Violence:

Stanfilco (the Philippines) was managing a 1000 acres banana plantation in the Philippines. Multiple violent incidents from armed lawless groups lead to the decision of closure of operations.

Nakashin Davao International (a Japanese company) closed down its frozen fruit operations in Davao city (the Philippines). The reason for the closure was labor agitation. Workers were demanding reinstatement and regularisation which was not acceptable to the company.

6. Consumer demand:

Ready Pac Produce Inc. (US) closed down the Salinas Valley Plant because of slow down in consumer demand for iceberg lettuce.

Treehouse Foods, Inc. (US) closed two of its plants at Azusa (California) and Ripon (Wisconsin). Declining consumer demand led to the discontinuation of the manufacture of sugar wafer products (bars, cookies and snacks).

7. Centralisation: Companies are more interested to manage fewer plants because of higher economies of scale. This concept leads to centralisation of operations with higher capacities. Saputo (Canada) closed down three of its milk processing facilities in eastern Canada and Saputo (Germany) closed down its cheese manufacturing unit in Quebec, Germany to increase capacity utilisation at other units. The efforts were meant to pursue additional efficiencies and lower costs. The process created more centralised operations with higher efficiencies.

8. Capacity underutilisation: . Economic unviability of the plant due to under-utilized capacity lead to the closure of Del Monte Foods (US) vegetable production and canning facility in Sampson County.

9. Single customer: Lonrho Fresh (South Africa) was into cut fruit and vegetable business and working on very thin profit margins. 70% of its sales were dependent on single retail player’ Pick and Pay’. Losing out some big business from their biggest customer, ‘Pick and Pay’ made the business unviable for Lonrho Fresh.

10. Dependability on subsidiesTINE (Norway) decided to close its facilities of Jarlsberg Cheese in Norway as export subsidies in Norway are being phased out by 2020. Increase in domestic competition and loss of export subsidies were expected to make TINE operations inefficient in Norway.

Above examples illustrates the importance of supply, demand, efficiencies, diversification, human resource, subsidies, trade, trends, consumer health and other critical factors in determining the viability of a unit.

For running a food processing plant, everything has to be well organised and planned, otherwise a single problem could make you out of the business.

Categories
Food Safety Trade

India allows in-transit cold treatment for Australian Fruits

The Indian government has announced market improvements to allow in-transit cold treatment of Australian top fruit, summer fruit and table grapes. Agriculture Minister David Littleproud says India’s approval of in-transit cold treatment of a variety of fruits is a major breakthrough for Australia’s growers. This approval to use in-transit cold treatment is expected to boost export volumes of Australian fruits such as table grapes, apple, pears and summer fruits.

The internationally accepted commercial cold treatment requirement for fruit flies is a minimum uninterrupted fruit pulp temperature and exposure time combination. The minimum cold treatment temperature for fruit flies in grapes, pears, plums and nectarines destined for India is 10 days at or below 0,0°C (32°F). For Ceratitis capitata, Mediterranean fruit fly, the treatment schedule is -3°C or below for 20 days and for Bactrocera trying, Queensland fruit fly, the treatment schedule is -3°C or below for 16 days.

Manual of Importing Country Requirements, Australia

The main benefit of cold treating products as it is transported, it gets to the market quicker and the exporter can charge a premium based on increased freshness. India offers a massive market of young, health conscious and vegetarian consumers seeking high quality fresh and safe fruit and vegetables. In 2019, Australia exported to India $830k worth of table grapes, $352k apples and pears and $180k summer fruit.

In addition to this, Indian government also approved phosphine fumigation of malting barley. Fumigation using phosphine will save industry up to $10 per tonne exported compared to treatment with methyl bromide. There has been growth in the consumption of beer in India and Australia is known worldwide for its high-quality malting barley. The Indian malt market is estimated at 500,000 tonnes, worth over $100 million dollars, and it is anticipated Australia could gain a fair proportion of that market in 2021.

Read more at Australian Government Media

Categories
Bankruptcy Commodities

Phoenix Commodities has gone into liquidation after amassing $400m in potential trading losses

Phoenix Commodities, a trader of agricultural products with offices in Dubai and Singapore, is being liquidated after amassing more than US$400 million (S$567 million) in potential trading losses. It was valued at $1.1bn-$1.24bn as recently as January, according to a document filed by its provisional liquidators.. The Phoenix Group, which was registered in the British Virgin Islands, operated globally with about 100 corporate entities located in Europe, Africa, Asia, Australia and North America and employed over 2,500 people.

First Abu Dhabi bank reports $73.3m exposure to Phoenix Commodities. Emirates NBD, Mashreq, HSBC Holdings and Standard Chartered were also owed millions by the company.

ArabianBusiness.com

Phoenix Commodities began as a rice trading business in 2001. Its executive chairman, Gaurav Dhawan, became the majority shareholder in 2006 and expanded its activities. It had three main divisions – agrifoods, resources (coal and metals trading) and consumer brands. Phoenix traded 12m tonnes of commodities and goods last year and claims to be one of the largest rice distribution companies in the world.

Categories
Intellectual Property Rights

GI tag for Manipur black rice, ‘Chakhao’

Chakhao, a scented glutinous rice which has been in cultivation in Manipur over centuries, is characterised by its special aroma. Chakhao has also been used by traditional medical practitioners as part of traditional medicine. GI has great potential to play a major role in trade and there is a possibility of preserving many traditional skills.

As defined by WIPO, a geographical indication (GI) is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin. A study published by the European Commission concluded that the sales value of a product with a protected name is on average double that for similar products without a certification.

The application for Chakhao was filed by the Consortium of Producers of Chakhao (Black Rice), Manipur and was facilitated by the Department of Agriculture, Government of Manipur and the North Eastern Regional Agricultural Marketing Corporation Limited.

Read more at NorthEast Now

Categories
Intellectual Property Rights Trade

Famed Kashmiri saffron granted Geographical Indication (GI) tag

As per the documents, the Geographical Indication Registry has approved the GI tagging on the Kashmiri saffron, symbolizing its exclusivity in the international market. Directorate of Agriculture has been declared as a registered proprietor of the GI of saffron. In Kashmir, saffron cultivation is done on 3,715 hectares of land. GI tagging will set apart the high-quality Kashmiri saffron from the cheaper varieties of Iran, Spain, and Afghanistan.

Kashmiri saffron is of superior quality because of the higher concentration of crocin, a carotenoid pigment that gives saffron its color and medicinal value: Its crocin content is 8.72% compared to the Iranian variant’s 6.82%, which gives it a darker color and enhanced medicinal value.

Kashmiri saffron, known for its quality and aroma worldwide, has been witnessing an invasion by cheaper Iranian saffron. Iran is currently the largest producer of saffron in the world, cultivating over 300 tonnes every year on 30,000 hectares of land. Due to the bulk market capturing by the Iranian saffron, the price of Kashmiri saffron dropped by 48% after 2007.

Read more at TheKashmirMonitor

Categories
Agriculture

Urban Agriculture: A national strategy in works for Luxembourg

Urban farming or urban agriculture is essential not only as an alternative to traditional production, but as an innovative solution to promote the circular economy and thus reinvent our cities. The Ministry of Environment, Climate and Sustainable Development, NEOBUILD and the Council for the Economic Development of Construction (CDEC) presented on the occasion of the conference “Living City: urban farming & revegetation of buildings” on 23 May 2019 the national strategy “Urban Farming Luxembourg”.

Urban farming, as a policy, could lead to effective balancing of economic and social interests while minimizing trade-offs. The benefits conceptualised in favour of the policy are:

  • Development of social ties by bringing living spaces, serving as a place of training, promoting reintegration and well-being of citizens.
  • Fulfilment of ecological functions like regulation of microclimates, air purification, preservation of biodiversity etc.
  • Stimulation of local economy by new activities where money stays longer in the local circuit.

Local production will also mitigate reliance on imports and serves as a buffer during supply disruptions to import sources, which contributes to nation’s food security.

Read more at UrbanFarming.LU

Categories
Trade

Similar to FedEx, Fruit Express shipping line launched

“Fruit express” shipping line for Southeast Asia was officially launched on April 27, 2020 at Dalian port in Liaoning province by China COSCO Shipping Corp. The first vessel for the Dalian route, the CSCL Santiago, unloaded 565 tons of dragon fruit imported from Vietnam at the Dalian container terminal. With the new route, various kinds of fruit imported from Vietnam can be shipped from Ho Chi Minh City to Dalian in just seven days, three to five days shorter than other Southeast Asian routes to the port.

Read more at ChinaDaily

Categories
Agriculture

Despite lockdown, producers didn’t change planting plans in USA

As compared to 2019, planted acreage in 2020 is as follows:

  • Corn Planted Acreage at 97.0 million acres Up 8 Percent
  • Soybean Acreage at 83.5 million acres Up 10 Percent
  • All Wheat Acreage at 44.7 million acres Down 1 Percent
  • All Cotton Acreage at 13.7 million acres Down Less Than 1 Percent

As compared to 2019, grain stocks on March 1, 2020 is as follows:

  • Corn Stocks totaled 7.95 billion bushels Down 8 Percent
  • Soybean Stocks totaled 2.25 billion bushels Down 17 Percent
  • All Wheat Stocks totaled 1.41 billion bushels Down 11 Percent

Read more at USDA Prospective Plantings and Grain Stocks

Categories
Trade

European Commission warns against shift towards protectionism in agri-food sector

Uncertainty about food availability sparked a wave of export restrictions, creating a shortage on the global market. Countries across the EU are increasingly considering protectionist measures, promoting national agri-food products and discouraging imported products. There has been a sequel of instances across the EU, particularly in Bulgaria, Czech Republic, Germany, France, Austria, Greece, where concerned ministers urged either to increase consumption of local products or to stop the import and sale of fruits and vegetables until locally grown supplies are exhausted.

That has prompted the European Commission to express concern about the effect this would have on the free movement of goods and services in the internal market, knowing the fact that no member state has the capacity to meet all its own needs for all products. The European Commission is “urgently addressing intra-EU export bans and restrictive measures by member states,” and could resort infringement proceedings against non-compliant member states.

Now is not the time for restrictions or putting in place trade barriers. Now is the time to protect the flow of food around the world.

Read more at Euractiv

Categories
Uncategorized

European vegetable producers are asking to open the Russian market for export

The Association of European Fruit and Vegetable Manufacturers (Eucofel) called on the European Commission to open export to the Russian market. An open letter asking to resume dialogue with Russia was signed by representatives of the fruit and vegetable sector of Spain, France, Germany, Greece, Italy, Poland and Portugal. In addition, producers of fruits and vegetables are asked to introduce temporary support measures for producers, which would guarantee an adequate level of product prices, restore market balance and eliminate violations.

Now Russian counter-sanctions, restricting the supply of certain types of agricultural products from the United States, the European Union, Canada, Australia, Norway, Albania, Montenegro, Iceland, Liechtenstein and Ukraine, apply to almost all types of vegetables and fruits, with the exception of potato, onion, pea and corn, as well as frozen and dried vegetables imported for the production of baby food.

Read more at Potato System