IndiaNews. FOOD & FOOD INGREDIENT REVIEW June July 2004 CONTENTS. Editorial

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1 CONTENTS Food Industry Overview p.3 Deficit rains cast a shadow Short-duration crops advised Monsoon scene mixed, not as bad as 2002 p.4 Breather for food industry Agri sector may wilt under service tax on transport agents Exporters concern over new European food law p.5 High Risk food items Metro Cash & Carry to source food products from Punjab Plant quarantine rules for wooden packaging p.6 Bengal not to allow contract farming India-Thailand iron out free trade glitches Aquaculture p.6 Bengal to set up fish processing complex p.7 US slams duties on Indian shrimp India, Norway collaboration for disease resistant shrimps Sea turtle certification for shrimp exports to US Seafood companies welcome excise duty cut Dairy, Meat & Poultry p.8 Multinational ice cream brands face heat in Indian market p.9 Amul dairy in Sri Lanka Amul setting up milk plant in J&K Amul, Walmart in sourcing talks Amul setting up milk powder plant p.10 Amul to expand liquid milk business cautiously Amul sales up Amul Kool chilled beverages NDDB s Kerala gambit goes bust p.11 Mother Dairy to widen product range Mother Dairy launches pure ghee Britannia to exit from milk Low fat ice cream from Mother Dairy China offers huge market for Indian dairy items p.12 Ruchi acquires Anik ghee & milk powder No excise duty on dairy machinery Budget proposal to help value-added chicken units Nestle introduces sweet lassi Contract farming in poultry sector p.13 Godrej to set up poultry biz in Bangladesh SKM Egg Products in expansion mode Alcoholic Beverages p.13 Allied Domecq drops IMFL plans; to focus on international portfolio Radico Khaitan mulls RTD foray p.14 Maharashtra waives excise duty on wines Wine finding market in India Maharashtra s wine festival p.15 Guinness UDV all set to exit joint venture with UB UB Spirits plans premium vodka War coming to an end UB axes 12 slow-moving brands UB looking at Pakistan p.16 Radico Khaitan to buy 8 more bottling units White rum, Deluxe brandy from Radico Radico to buy Bacardi stake in Whytehall McDowell & Co profits up p.17 Kyndal lines up 18 brands Heineken in talks with Mount Shivalik APB likely to invest in India p.18 VAT proposal raises hopes Contents continued on next page IndiaNews is published every 2 months by: GIRACT 24 Pré Colomb, 1290 Versoix Geneva Switzerland Tel Fax info@giract.com

2 CONTENTS (Continued) Non-alcoholic Beverages p.18 Pure juices, dairy beverages may be exempt from pesticide norms Water norms for soft drinks notified p.19 Bisleri water to go to US Rasna introduces vanilla Cola Cola Rajasthan villagers protest against Coke plant Pepsi rolls out local flavours Pepsi plans regional hub for juice p.20 Fruit juices projected to grow Mother Dairy launches Safal juices Fruit-based beverage from Dabur Tea p.20 Pak budget cheers Indian tea p.21 Tata Tea may exit plantations Tata Tea profit at Rs. 915 million Tea growers upbeat on price recovery South Indian tea output may dip Disappointing budget for tea industry p.22 Floods wash out Assam tea Iran interested in Indian tea Barista to expand with franchisees money Coffee p.22 Barista to expand with franchisees money p.23 Coffee exports up in Place of origin branding for coffee Indian coffees pick awards No relief for coffee sector in Budget p.24 CCL lines up freeze dried coffee foray Café Coffee Days to move abroad Food Service & Retailing p.24 UK-based group plans Chinese restaurant chain Rahejas set sight on food retailing p.25 Subhiksha may acquire two chains Indo Rama plans foray into grocery retail Pantaloon Retail s Rs. 1.5 billion expansion plan p.26 Nilgiri s plans US venture Subway sees growth Indian retail market highly attractive Women, kids only mall a new experiment p.27 ISKCON chain for Govinda s Prasadam Big Mac to pump Rs. 2.5 billion Gopaljee forays into food retail Baseraa plans to open 40 restaurants Snacks p.28 Frito Lay plans plant in Bengal Campco exporting cocoa products p.29 Mars eyes Indian candy market Britannia net profit higher Biscuits buck downtrend p.30 Sri Lanka biscuits to enter India Bisk Farm Biscuits draws up expansion plans Pet Food p.30 Nestle gets nod to sell pet food through Excelcia Culinary Items p.31 Amul enters white health-food-drink Safeguard probe into starch imports p.32 Instant mixes from Tops Tops custard Nutritional supplement for diabetics Prego pasta sauce Sugar p.32 EID Parry to invest in sugar unit Sugar production down p.33 Summer heat for sugar buyers Deals struck for sugar import Bajaj Hindusthan on way to becoming Asia s no. 1 p.34 Bannari adds alcohol plant Closed sugar mill revival Ponni Sugars trying new sources of raw material p.35 Praj captures Colombian market Oils p.35 New technology may cut rice bran oil price Cargill in pact with Parakh Foods p.36 Oil industry happy with budget Duty hike fails to ease millers problems Base import price of crude soya oil cut Groundnut oil exports cross 100,000 tons p.37 Errant monsoon slows kharif sowing Ruchi Soya expansion plans and IFC reprimand A turnaround year for Agro Tech Foods Contents continued on next page Vol GIRACT 2004

3 CONTENTS (Continued) Spices & Flavours p.38 Spices Board to take up Sudan dye issue with EU Natural colours from KCP Biotech India s vanilla superior Drought-resistant cardamom on cards p.39 Domestic Prices New brand of asafoetida Monsoon Special In this issue of IndiaNews, along with all the interesting news and stories about Food and Food Ingredients, we bring you photographs that convey the spirit of monsoon. Rains convey joy, happiness and romance in India where dark clouds (and not sun) provide inspiration for poetry. Foodgrains p.40 Pakistan interest in Indian wheat Grain exports may fall Satnam plans rice mill in UK EU restrictions on Indian basmati Agro Tech to exit branded staples Fruits & Vegetables p.41 Mangoes production and exports Bengal mangoes reach London Indian mangoes commercially launched in China p.42 Freight advantage for Pak mangoes UP to launch mango brand Maharashtra s mango exports Mango exports to UAE rising p.43 Alcohol from banana peels Gamma rays for bananas Kashmir cherry crop hit Grandnaine bananas for EU p.44 Kerala pineapple growers eye US markets Pomegranate exports from Maharashtra picking up Onion growers see export boom p.45 Uttaranchal plans to export litchi Bottle neck chokes gherkin exports Imports hurting desiccated coconut powder makers Essar in exotic fruit biz p.46 Contract farming of vegetables in Bengal Children enjoying the rain in Allhabad, Uttar Pradesh Rains in Delhi Biotech p.46 Transgenic eggplant Government to oppose EU wheat patent to Monsanto p.47 Indian Council of Medical Research cautions on GM foods Budget a damp squib, says biotech sector p.48 Biotech panel submits final report p.49 India among leaders in biotech Major Food Companies p.49 ITC Foods aims Rs. 5 billion turnover Women plucking tea in Assam Vol GIRACT 2004

4 Food & Food Ingredients Review The four months from June to September is monsoon time in most of India. Monsoon is a phenomenon typical to Indian subcontinent and Southeast Asia. It brings rain clouds all over India. The monsoon system generally enters the southern tip of Kerala around 1st June and reaches Delhi by the end of June. India s economy is dependent to a large degree on the monsoon. Good rains lead to adequate drinking water availability, bountiful crops and all round prosperity. However, almost every year some parts of the country receive more than normal rains while some others are starved of rains. So, every year is a flood year and is also a drought year. Year 2004 seems to be no exception. A few states of India (Bihar, Assam etc.) were reeling under devastating floods while, at the same time, the earth in large parts of central and western India wore a parched look until the last week of July. Fortunately, as July came to an end, rains lashed the areas where the governments were preparing to start drought relief measures. At the time of writing, it was not yet possible to measure the success or failure of the 2004 monsoon. Surely, the monsoon is neither a complete failure nor an unqualified success. In our next issue, we hope to be able to carry a detailed report on the monsoon along with the impact on individual crops. While large parts of the country were looking at the sky for dark clouds and others were praying for the clouds to go away, the Finance Minister presented the Union Budget on 8 July. Generally, the Indian government s budget is presented on 28the February every year. However, this year, it was delayed due to parliamentary elections. While presenting the budget, P. Chidambaram said, Before I deal with other areas of concern on which the budget will have an impact, let me give you a snapshot of the goals that I have set for myself: Doubling agricultural credit in three years, accelerating the completion of irrigation projects and investing in rural infrastructure Providing farm insurance and livestock insurance Improving agricultural product markets, and promoting agri-businesses Drinking water for all Expanding water harvesting, watershed development and minor irrigation and microirrigation schemes Enhancing investment in industry public and private, domestic and foreign to create new jobs The above (and other) goals of the government were listed in the section, titled Thrust Areas, of the Minister s speech. It is clear that the new government is intending to focus on agriculture as a thrust area. This is likely to provide twofold opportunities to the food and food additives industry. On one hand, growth in agriculture will lead to increased production leading to better availability of key raw materials. On the other hand, agricultural growth will lead to increased rural incomes, which should mean larger markets for packed food products. Of course, we still do not know whether the government s intentions and goals will translate into real progress. Let us be optimistic and wish the new government all success in its laudable objectives. ( continued on next page) Vol GIRACT

5 Food & Food Ingredients Review Another government that deserves a pat on its back is the Government of the state of Maharashtra for waiving excise duty on wines. The Indian alcohol industry has been traditionally burdened with very heavy duties. Governments have generally treated wine as another alcoholic beverage. Maharashtra s initiative will, hopefully, provide a boost to Indian wine industry. In the last week of July, just as vineyards were getting ready to celebrate, shrimp farmers and exporters were worried. The US Department of Commerce imposed a provisional antidumping duty of an average 14.2 per cent on Indian shrimps. This was much higher than industry anticipation. Hindustan Lever Ltd. was the worst hit with a duty of per cent. It will be some time before the impact of the duty imposition can be understood and analyzed. Another development that will have a long-term impact on the Indian industry is the understanding between India and Thailand for a Free Trade Agreement (FTA). The FTA covers 82 items in all, of which 12 are food products. More important than the direct impact of Indo-Thai FTA is the general policy direction. It is likely that more such FTAs may be signed in the coming months. It is possible that India s relationship with ASEAN may strengthen considerably. In due course, India may either join ASEAN or at least have an FTA with ASEAN. At the moment, such possibilities appear distant. But there seems to be no doubt that the Government of India is following a look-east policy. Surely, it is no coincidence that Prime Minister Manmohan Singh s first foreign visit was to an eastern country (Thailand) and not to the cooler climes of Europe or America. In looking for friends towards the east rather than towards the west, India is seeking to redefine its position in the world. This is apparent in the hard negotiations that have been taking place on agricultural issues at the WTO. India no longer appears like a new kid. India is globalizing, but now on her own terms, with confidence and maturity. Vol GIRACT