India’s food logistics sector is the unseen force ensuring that fresh produce, packaged goods, and essential commodities reach millions of households across its vast and varied landscape. This intricate network spans from the fertile plains of Punjab to the bustling markets of Mumbai and quaint landscapes of the Northeast, encompassing everything from smallholder farms to high-tech warehouses. This month’s cover story delves into how this supply chain takes the form of the lifeline sustaining India’s citizens.
Ever wondered how the food we eat – fresh or packaged – reaches us? From a philosophical point of view, it takes months to years from when a farmer sows the first seed of the crop to when we relish it in a meal. Much toil also goes into farming and harvesting poultry/farm animals and seafood.
From the perspective of supply chains, the food we eat travels a long complex journey through the farms, processors, distribution, and finally, the supermarket shelves/local mandi, before it reaches our plates.
Over the past two decades, there has been rapid growth in the food sector in India. Food production and processing are developing in tandem with the growth in the capital-output ratio. India has established itself second in worldwide farm exports and first in the net cropped area followed by the US and China.
The concept of ‘Farm to Fork’ has elevated during the last decade, yet there are many unaware of the collective effort it takes to bring food to our plates. This applies to agri/fresh produce as well as packaged items.
The whole process of a food supply chain is extremely meticulous and needs absolute attention at all links. Increased tech adoption, strategic policy shifts and the rise of innovative startups has changed the landscape of food logistics.
However, flip the coin and this sector is not without its challenges. The food supply chain is opaque, and uncertainties lurk in every corner of the network. There are still some infrastructural gaps and regulatory hurdles, as well as the pressing need for sustainability and reducing food wastage. However, the resilience and adaptability of the players involved, from farmers to logistics providers, underscore the sector’s potential to overcome these obstacles.
“India possesses one of the world’s largest logistics sectors, which plays a pivotal role in the country’s economic development. Rapid technological advancements, infrastructure improvements, and government initiatives such as the implementation of GST and the National Logistics Policy (NLP) are ushering in significant transformations, as the sector evolves swiftly to adapt to escalating demands,” says Shampayan Ghosh (Head of Supply Chain Management, Mother Dairy Fruits and Vegetables).
It is safe to say that as India continues to grow and urbanize, the demand for efficient and reliable food logistics is only going to increase.
Current State
With the population surpassing China, India is a large and expanding market for food products. In fact, food products are the single largest component of private consumption expenditure, accounting for nearly 50% of the total spending. Also, the increasing income and need for convenience and hygiene is driving demand for perishables, non-food staples, and processed foods.
India’s food logistics sector is characterized by its diverse and expansive network. Within the sector, the agri-fresh segment involves the movement of perishable items like fruits, vegetables, dairy, and meat products. On the other hand, packaged foods include processed and ready-to-eat items. Both of them require efficient ambient as well as cold-chain storage and logistics to maintain their quality and freshness.
Dharmesh Srivastava (Vice President, AgroTech Foods) says, “The packaged foods industry in India is expanding with various segments like beverages, snacks, and staples. A key concern in this industry is maintaining the freshness of products, as consumers often check manufacturing dates despite long shelf lives. The efficiency of logistics is crucial, ensuring rapid movement from manufacturing to consumer.”
Giving insights into how packaged foods move through traditional channels, modern retail, and e-commerce, Srivastava reveals some interesting details. “Traditional channels, or general trade, involve a longer supply chain from factories to depots, distributors, and finally to retail stores, often resulting in higher lead times and inventory holding. Modern retail, with organized supply chains and better storage criteria, offers fresher products and more efficient distribution. Lastly, e-commerce, growing rapidly, provides the best management due to its focus on speed, minimizing stock holding, and ensuring fresher products for consumers.”
On the other hand, the long prevalent ‘Raashan’ or Public Distribution System (PDS) plays a crucial role in ensuring food security for millions of Indians, especially those in the lower financial bracket. Managed by the Food Corporation of India (FCI), the PDS distributes essential commodities like rice, wheat, and sugar at subsidized rates to the economically disadvantaged sections of society. This system, despite its challenges, forms the backbone of food distribution in rural and urban areas alike.
Significant Challenges
Like any other industry, the food logistics sector in India faces several challenges that hinder its efficiency. Inadequate infrastructure is a major issue, with insufficient cold storage facilities leading to significant post-harvest losses, particularly in the agri-fresh segment.
Ghosh says, “Most freight movement in India depends on road transportation, which is costly and inefficient for agri-fresh produce.”
High logistics costs, driven by fragmented supply chains and inefficiencies in transportation, further exacerbate the problem. For instance, road transport dominates the logistics landscape, but poor road conditions and regulatory hurdles increase transit times and costs. Moreover, the rising fuel prices have had a significant impact on the overall cost of transportation.
Even for packaged foods, seasonality poses a significant challenge, affecting consumption and production patterns, warehouse space, and transportation. Managing shelf life is critical, as shorter shelf lives complicate expiries and financial losses.
“Volatility in demand, influenced by seasonal and occasional consumption, adds complexity to supply chain management,” says Srivastava.
According to the Food and Agriculture Organization (FAO), India wastes around 40% of its food due to a lack of cold storage. The United Nations Environment Programme (UNEP) Food Waste Index Report 2021 estimates that India contributes 68.8 million kilograms of wasted food per year, which is 7% of the global total.
Adding to it, the quality and safety standards are not met with the those set by most countries worldwide. For instance, MDH and Everest – two of the most prominent and widely sold spice brands in India – were under serious scrutiny globally for the alleged presence of ethylene oxide, a toxic chemical, in their spice mixes sold internationally.
In another series of incidents recently, unsettling surprises emerged from delivery packages, with reports of a human finger, centipede, and a dead mouse found in food items delivered by quick commerce firms like Zepto and Blinkit.
The following items can be listed as the main challenges that curtail the evolution of India’s food supply chains:
- Mistrust and lower product quality due to intermediaries and lack of proper links between players.
- Less quality and unsafe products due to the absence of regulatory authorities in small and medium organizations.
- Uneven demand-supply pattern due to changing consumer behaviour and fragmented supply chain.
- Price increases due to subsidies and the involvement of third-party vendors.
- Compromised quality, safety, and hygiene due to improper packing and manual handling.
- Delays and wastage due to poor infrastructure and lack of cold chain.
- Lack of technology adoption for end-to-end visibility and optimization.
Although a lot has been achieved in the past one decade in bridging the gap between current infra and what actually is needed in the food supply chain, we still have miles to travel. Pranav Malik (VP – FMCG and Key Accounts, ISS Global Forwarding).
There have been many improvements in how service is provided to manage food, especially perishable foods. However, this is more down to human effort and monitoring as opposed to just technology being the catalyst. There are still gaps in hygienic and efficient mid-mile and last-mile delivery for food logistics. Mark Alzawahara, Founder & Managing Director, Catch of Norway
India can adopt several innovative practices from other countries to enhance its food logistics sector. For instance, Japan’s just-in-time (JIT) inventory systems have been effective in minimizing waste and improving efficiency. JIT systems reduce the costs incurred in storing raw materials by avoiding overproduction, inventory accumulation, and wastage. Uddhav Kumar, CEO and Co-Founder, Lynkit
Reducing food wastage is important to achieving sustainable development goals, ensuring food security, conserving resources, and mitigating environmental impacts. Deploying a combination of technological, educational, regulatory, and behavioural strategies can significantly reduce food wastage. Sanjeev Setia, Supply Chain Expert.
This is an abridged version of the Cover Story from August 2024 issue of Logistics Insider magazine. To read the complete story, click here.
