Post Date : December 15, 2021
The food supply chain has evolved significantly from how it used to operate earlier. The difficult time brought up by the pandemic has pushed the Indian agro-food chain to adapt to a much more organised and resilient way of working as consumer behaviour and buying patterns took a 360 degree turn.
The Indian food supply chain has opened itself to newer technologies in storage, distribution and even packaging. In this special feature, we explore the changes in the Indian food supply chain after the pandemic and reflect upon how the industry managed to stand tall amid the chaos.
India’s food supply chain, especially the agri- food supply chain, faced severe disruptions during the initial days of the stringent national lockdown last year – despite the Government providing relaxations to the segment. A survey done by the International Food Policy Research Institute (IFPRI) of around 370 farmers across 9 Indian states reveals that out of those who had harvested their produce in 2020, 29% were still holding on to it, 13% had sold the harvests at throw-away prices and about 7% reported that they had to let the produce go waste.
Bringing to light the scenario at the time, Mihir Mohanta, General Manager Supply Chain, Mother Dairy Fruits and Vegetables says “Many of the operating middlemen (Adat), commission agents preferred to stay at home. Some left their operations to be managed by their Accountants (Munims). Consequently, a completely new market scenario emerged. Most mandis across the country operated at around 50% of their capacity. Some were closed too. Most cash-rich Adat/Commission agents took the back seat, preferred not to operate during these hard times. Many states decided to shut down the local mandi, weekly bazaars, or the rayatu (farmers) bazaars to avoid crowding. Small traders also failed to reach such places in want of public transport.”
Food arrivals in wholesale markets during the first phase dropped by 64% on an average in the month following the lockdown, while wholesale prices rose by about 10%, as reported by Private Enterprise Development in Low-Income Countries (PEDL). Lack of drivers, machinery, migrant laborers – even the skilled ones (required for banana/ grapes/mango) – shot up the cost of transportation, disrupted harvests and warehouse operations, resulting in the decline of food arrived at the markets. However, after the first phase of the lockdown ended, volumes steadily recovered, reaching similar levels to those in 2019, while prices gradually returned to a declining trend.
“The COVID-19 pandemic has placed unprecedented stress on food supply chains, with bottlenecks in farm labour, drivers, processing, transport, and logistics, as well as momentous shifts in demand. Food supply chains have demonstrated remarkable resilience in the face of these adversities. Grocery stores and hypermarket shelves have been replenished over time, as stockpiling behaviour disappeared and as supply chains responded to increased demand.” says Anil Kumar Mishra, National Logistics Head, Pladis Global.
Several emerging trends after the initial COVID shock-wave have supported the food supply chain in showcasing remarkable resilience like the surge in demand for e-grocery, rise in agri-tech startups, and the increased importance of cold chain. Let’s discuss these pointers in detail.
Surge in demand for e-grocery: Fearing the pandemic, customer preferences quickly shifted from traditional ways to online shopping from the safety of their homes. “Digital platform for online groceries and their adoption increased as they offered non contacting supply of goods with social distancing”, Mr Mishra said.
Adding to it Mr Mohanta says, “Many of these organized players were quick to adopt the sanitization practices and restore their operation fast. Some of them marketed the hygiene features as their offerings to re-assure the customers. Many of the retailers came up with innovative ways to maintain social distance and hygiene.”
According to RedSeer, India’s online grocery market is poised to reach $24 billion by 2025 (INR 1.8 lakh crore), accounting for 3% of the overall grocery sector and maintaining the upward trajectory.
Rise of agri-tech platforms: With farmers finding it difficult to source inputs locally, an opportunity arose for companies dealing in agri-inputs. The agri-tech startups capitalized on the opportunity offered by the pandemic and created a community to build platforms for farmers to put their crops, tractors, and cattle for sale.
As per Bain & Co, the agri-tech sector in India is expected to grow to a $30-35 billion market by 2025. The only bottleneck was the slow-paced tech adoption, which was – to an extent – resolved by the pandemic, as it gave the agri-tech startups a chance to emerge and garner investors’ attention.
The cold chain industry which plays a critical role in the food supply chain, often notoriously known for being limited and underdeveloped, also incurred effects of COVID-19. The criticality of the cold chain was strongly realized during the pandemic when vaccines were to be delivered and businesses were forced to revise their business models and switch to home delivery solutions.
Highlighting that the cold supply chain received appropriate attention after e-grocery, both of them pushed by the pandemic, Mr Mohanta said, “The fruits & vegetables need to be looked at in a different perspective as these are commercial operations; have a bulk mass and individual commodity having different storage parameters. The cold chain can improve the shelf- life of items like apples, grapes, kiwi, etc. But it is not recommended for all the items all the time, as it adds cost to the product. The studies conducted by CIPHET, Ludhiana on post-harvest losses in F&V are as high as 18%. With appreciation, understanding & creation of infrastructure, this is expected to improve.”
Understanding the need as well as the potential of the segment, support and investments from the Government of India are being factored towards the cold chain segment. The Government of India has launched several schemes to support the development of the cold chain. The Pradhan Mantri Kisan Sampada Yojana (PMKSY) launched by the center aims to create modern infrastructure with efficient supply chain management starting from farm gate to retail outlet. The key purpose of PMKSY is not only to provide a big boost to the growth of the food processing sector in the country but also aim to provide better returns to the farmers.
“The Government is supporting the creation of infrastructure facility along the entire supply chain viz. pre-cooling, weighing, sorting, grading, waxing facilities at farm level, multi-product/ multi-temperature cold storage, CA storage, packing facility, IQF, blast freezing in the distribution hub and reefer vans, mobile cooling units for facilitating distribution of horticulture, organic produce, marine, dairy, meat, and poultry, etc. The scheme allows flexibility in project planning with special emphasis on the creation of cold chain infrastructure at farm level,” added Mr Mohanta.
In addition to this, the Government of India has also set up National Centre for Cold Chain Development (NCCD), which helps in establishing building standards through international bench-marking and promotes research and development activity in the cold chain sector.
“With digitization, customers are receiving their food products through pick up or delivery. This creates an urgency to ensure products are delivered and/or stored appropriately. The entire food supply chain vertical was seen to be directed by digitization and big data. Data analytics platforms are enabling supply chain professionals to gain up-to-date visibility into market insights, thereby better-adjusting sales and warehouse operations planning, said SPS Chauhan, Director-Asia & Middle East in Bastian Solutions
Alexandre Amine Soufiani, Managing Director, FM Logistic India, speaking on the same, says, “Today, more and more companies are embracing technology to gain an edge in this highly competitive environment. FMCG players are making a shift towards complete automation, intending to bring the entire chain from procurement to distribution on the same platform. Many have introduced new route optimization systems which geo-tags the routes taken by their salesmen. This helps them to increase their direct distribution reach with the same number of salesmen.”
This is an abridged version of the original article that was published in the December edition of the Logistics Insider magazine. To read the complete article, click here.