Description
Document that explains the business plan of export peanut to malaysia.
International Business
A Business Plan
Peanut Export to Malaysia
Southern Exports Pvt. Ltd.
1. Executive summary
Product overview Groundnut is very important crop around the globe for its nutritional and trade values. It is also a poor man’s crop as it can be grown fairly well even on marginal soils with less fertility, and low moisture conditions. Groundnuts can also be grown in large quantity with the use of high amount of inputs such as fertilizers and pesticides, high yielding cultivars, and irrigation. As a result of varying farming situations, there is a large variation in the productivity levels of groundnut around the world. In countries like the United States where the crop is grown on large farms with assured inputs, productivity levels are very high in comparison to a country like India where the crop is traditionally grown by small-holding farmers, on less fertile soil, in rain fed conditions, with low amount of inputs. Many Asian and African countries suffer from a typical productivity problem due to reasons such as moisture stress, poor soil fertility, pests and diseases, and low input levels. Also, in most of these countries groundnut is grown on marginal lands. Such a situation demands development of cultivars that can withstand drought and resist the attack of pests and diseases. While in Africa, government priorities lead to the decline of groundnut cultivation, South American groundnut production was hit by the shift from groundnut to more competitive oilseed crop soybeans by the industries. All of these factors point to the fact that it needs a careful planning and concerted efforts to keep the balance of high level of production and trade of economically and nutritionally important crop like groundnut. The groundnut has a tremendous potential to offer in mitigating the protein malnutrition in poverty ridden countries of the world. The business plan consists of exporting peanuts to Malaysia. Looking at the consumption pattern of the people and the demand of this product, the growth opportunity is very large in this market.
The major exporters of peanut are as follows:
2. Business history
Peanut Production China is the world's largest producer of peanuts, with a two-crop annual production of about 10 million metric tons. Following closely is India with 7.5 million metric tons, also with two crops annually. The peanuts from these two countries are mostly used for cooking oil, but do export edible peanuts when market conditions and exchange rates are favourable. Next in line is the United States with 1.8 million metric tons. About one-third of the U.S. production is exported as edible kernels. Indonesia produces about 1 million metric tons, mostly for domestic markets. Then comes Argentina, having recently claimed the title of the largest export edible marketer, producing .7 million metric tons. Argentina grows peanuts strictly for export with almost no domestic need for them. Other countries producing export peanuts include: Burma (.55 million MT), Senegal (.55 million MT), Zaire (.56 million MT), Nigeria (.35 million MT), Vietnam (.34 million MT) and South Africa (.17 million MT).
Major exporter During the past 25 years, countries vying for a share in the edible peanut market have changed completely, while production has increased slightly or, in some years, held steady. The key word in the future of export peanuts will be globalization. The past shows us that things are constantly changing. The top exporters in 1970, in order, were Nigeria, Niger, South Africa, Sudan, USA, India, China and Argentina. In 1985, the rankings in order of exports were USA, China, Argentina, India, South Africa, Sudan and Malawi. In 1998-99, the U.S. Foreign Agricultural Service estimates that the world's peanut exporters are, in order, Argentina (27%), USA (26%), China (18%), India (16%), Vietnam (11%) and South Africa (2%). As the players change, so do the export issues. In 2006 India's Stand as an Exporting Country for product Ground-nuts shelled, not roasted or cooked was 6th with the value of us $230,750,00. In 2006 India had sold 42,877 metric tons ground nuts. Argentina was the top producer with the value of us $329,210. Although India is second largest producer of ground nuts export is lower because of higher domestic consumption.
India's Stand as an Exporting Country for product Ground-nuts shelled, not roasted or cooked (HSCODE- 120220) in 2006
India’s Production of Ground Nut Indian Groundnuts are available in different varieties Bolds or Runners, Javas or Spanish and Red natals and rich nutty flavour, Sweet taste, crunchy texture and a relatively longer shelf life. Groundnuts in India are available throughout the year due to a two-crop cycle harvested in March and October. On an average, India produces 7-8 million tonnes of groundnuts (unshelled) every year. in 2006 India’s production of ground nut was 79,90,000 tons. In fact, considering the current export figures, India has a much larger potential to supply high quality groundnuts to the international buyer. But due to high rate of domestic consumption share in the global market is lower.
Indian Production of GROUNDNUT( HSCODE- 12021001) in 2006
State Gujarat Andhra Pradesh Tamil Nadu Karnataka Rajasthan Maharashtra Madhya Pradesh Others Orissa Uttar Pradesh Total
Production In Tonnes 3390000.00 1370000.00 1100000.00 670000.00 490000.00 410000.00 230000.00 130000.00 110000.00 90000.00 7,990,000
Percentage Share in Total 42.43 17.15 13.77 8.39 6.13 5.13 2.88 1.63 1.38 1.13
Source : National Horticulture Board
Product definition as per ITC HS code Peanuts ITC HS code is 12022010. 12 stand for Chapter 12: Oil Seeds and Oleaginous Fruits; Miscellaneous Grains, Seeds and Fruit; Industrial or Medicinal Plants; Straw and Fodder. 1202 stand for Ground-nut, not roasted or otherwise cooked, whether or not shelled or broken. 120220 stand for ground nut Shelled, whether or not broken. 12022010 stand for Kernels, H.P.S.
Malaysian culture and food habits The continent of Asia is a melting pot of different cultures, wonders and attractions. The country of Malaysia is situated in the heart of Asia. The population in this country is very mixed comprising of Malays, Chinese and Indians. Malaysia is one of the leading tourist destinations and is very popular for its towering skyscrapers, natural wonders, beautiful beaches and some of the great diving spots in the world. The people of Malaysia speak Malay (Bahasa Melayu) and this is the official language. English is widely spoken in the country also. You will come across various ethnic groups who speak various languages and dialects. Islam is the official language followed here but other religions are freely practiced here. The people of Malaysia love their food. There are numerous restaurants in Malaysia that serve world class cuisine. You will find a range of Chinese, Malaysia, Japanese and Thai Cuisine. Some of the popular restaurants include Amy's Malaysian Restaurant, Golden Dragon, Mayflower, Panda and Rasa Sayang. Satay with Peanut Sauce is a very popular dish in Malaysia. It is the mainstay of Malaysian Cuisine where beef or chicken is served in spicy peanut sauce is served. Nasi Lemak is a morning favorite among the people of Malaysia. The dish comprises of rice served with coconut milk and served with chilly pate, anchovies, peanuts and cucumber.
3. Market research
Market overview Groundnut is the 13th most important food crop of the world. It is the world's 4th most important source of edible oil and 3rd most important source of vegetable protein. Groundnut seeds contain high quality edible oil (˜ 50%), easily digestible protein (˜ 25%) and carbohydrates (˜ 20%). Groundnut is grown in nearly 100 countries. India is one of the major exporting country of groundnuts after china and its export has increased from Rs. 513.68 Crores (USD Million 116.03) in 2005-06 to Rs. 798.46 Crores (USD Million 177.12) in 2006-07. The Major Market for Indian groundnuts are Indonesia, Malaysia, Philippines, U.K and Singapore. The battle for a share of the world's market of edible peanuts is constantly changing. World production now averages nearly 26.7 million metric tons annually. While much of the production is consumed as peanut oil, a lucrative trade in edible peanuts involves about 1.25 million metric tons. As the trade of peanuts has increased, the market is mostly affected by the following factors: price, quality, on-time service to buyers and ample supplies for the market.
Market potential In Malaysia growing consumption of peanuts in various foods application increases demand of peanuts. Due to lower production of peanuts they have to import large quantity of peanuts in the country. Previously, Vietnam shipped 10,000 – 13,000 tonnes of peanut to Malaysia. However, unlike Chinese and Indian peanuts, Vietnamese peanuts have inconsistent quality, bad preserving techniques and unhygienic processing. But, Malaysian people are keener on Vietnamese peanuts because of better taste. Vietnam can export more than 10,000 tonnes of peanut to this market because this is a favourite dish of Malaysians.
S.No. 1. 2. 3. 4. 5. 6. 7. 8. Values in US$ Million %Growth Total export of commodity %Growth %Share of country (1 of 3) Total export to country %Growth
\Year
2002-2003
2003-2004 7.24
2004-2005 9.42 30.11
2005-2006 15.83 68.16 70.08 15.37 22.59 1,161.86 7.18 1.36 44.2735
2006-2007 19.18 21.14 106.70 52.25 17.98 1,303.29 12.17 1.47 45.2849
69.66
60.74 -12.80
10.39 749.37 892.76 19.13 0.81 48.3953 45.9516
15.50 1,084.06 21.43 0.87 44.9315
%Share of commodity (1 of 6) Exchange rate: (1US$ = Rs.)
(source –apida)
Export to Malaysia increase three times in four year shows us export potential of peanuts to this market. Unlike developed market in Malaysian government rules are also favourable, which make trade more conducive. Currently India is exporting only small portion of Malaysian demand so there will be good growth potential for trade.
4. Legal decisions
Tariff duty Export of peanuts Shelled in Malaysia attracts custom duty as under;
Final Bound Duties HS_Code Product MFN Applied Duties Import Duties [Duty [Duty [Share [Duty [AVG][Max]- [Binding in [AVG][Max]Free in Free in in %]- Free in FBD FBD %]-FBD MFN MFN %]-FBD %]-MFN Imp %]-Imp 4.30 -100.00 1.70 69.20 20.00 1.30 81.40
120210
GROUNDNUT IN SHELL (HPS) 32.20
120210
GROUNDNUT IN SHELL NES
32.20
4.30
--
100.00
1.70
69.20
20.00
1.30
81.40
200811
GROUNDNUTS PRPD/PRSVD
151.10
11.80
--
100.00
3.80
63.90
80.00
0.60
81.10
(source –apida)
Non-Tariff Measures While market access would improve for export of peanuts on account of reduction of import duties, it may be decrease due to the application of non-tariff measures. It is important to define non-tariff barriers. Any restriction imposed on the free flow of trade is a trade barrier. Trade barriers can either be tariff barriers, that is levy of ordinary customs duties within the binding commitments undertaken by the concerned country in accordance with Article II of GATT or non tariff barriers that is any trade barriers other than the tariff barriers. Non-tariff barriers can take various forms Some of these measures include import quotas, licensing, exchange and other financial controls, prohibitions, discriminatory bilateral agreements, variable levies, advance deposit requirements, antidumping duties, subsidies and other aids, government procurement policies, government industrial policy and regional development measures, competition policies, immigration policies, customs procedures and administrative practices, technical barriers to trade, and sanitary and phytosanitary measures. But for broadly peanuts import may be restricted due to following non-tariff measures.
? Import Policy Barriers One of the most commonly known non-tariff barriers is the prohibition or restrictions on imports maintained through the import licensing requirements. GATT Agreement requires Members not to impose any prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures. Any form of import licensing (other than an automatic license) is, therefore, to be considered as an import restriction. Certain restrictions on imports, however, can be imposed in accordance with various provisions of the GATT. These include restrictions on grounds of safety, security, health, public morals etc. GATT Agreement provides for certain general exceptions on grounds of protection of: ? public morals ? human, animal or plant life or health, ? National treasures of artistic, historic or archaeological value etc.
Developing country Members has often faced more restrictive treatment in the developed countries who have often raised barriers against developing countries to protect their own market.
? Standards, Testing, Labelling & Certification Requirements Prima-facie Standards, Testing, Labelling and Certification requirements are insisted upon for ensuring quality of goods seeking an access into the domestic markets but many countries use them as protectionist measures. The impact of these requirements is felt more by the purpose and the way in which these are used to regulate trade. Two of the covered agreements under the WTO namely the Agreement on the Application of Sanitary & Phytosanitary Measures (SPM) and the Agreement on Technical Barriers to Trade (TBT), specifically deal with the trade related measures necessary to protect human, animal or plant life or health, to protect environment and to ensure quality of goods.
The SPM Agreement gives a right to take sanitary and phytosanitary measures necessary for the protection of human, animal or plant life or health, provided: ? such measures are not inconsistent with the provisions of the Agreement; ? They are applied only to the extent necessary; ? They are based on scientific principles and are not maintained without sufficient scientific evidence; ? They do not arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail including between their own territory and that of other Members, and ? They are not applied in a manner which would constitute a restriction on international trade. The trade of developing country Members has often faced more restrictive treatment in the developed countries who have often raised barriers against developing countries on one pretext or the other. Some of the non-tariff barriers falling in this category are ban on import of goods like textiles and leather treated with azo-dyes and pentachlorophenol, ban on use of all hormones, natural and synthetic in livestock production for export of meat and meat products, stipulation regarding pesticides and chemicals residues in tea, rice and wheat etc., and requirement of on-board cold treatment for fruits and vegetables export.
? Export Subsidies & Domestic Support Both export subsidies and domestic support have a great bearing on the trade of other countries. While export subsidies tend to displace exports from other countries into the third country markets, the domestic support acts as a direct barrier against access to the domestic market. Generally the developing countries can hardly find resources to grant subsidies or domestic support. But developed countries like the Members of the European Union and Japan have been heavily subsidising their agricultural sector through schemes like export refunds, production
support system and other intervention measures. All this export subsidises and domestic support to farmer makes export of peanuts to developed country expensive.
Specific Non tariff barrier for export of peanuts in Malaysia Aflatoxin contamination of groundnut is a widespread problem in most groundnut-producing countries. It is a type of a fungus which is a natural syndrome for any groundnut farmed under rain fed conditions. The Aflatoxin contamination does not affect crop productivity but it makes the produce unfit for consumption as toxins are injurious to health. Most countries specify the Aflatoxin limit for the exports of groundnut. At present the permissible limit of Aflatoxin for groundnuts in the European union is 2 ppb whereas in case of the ASEAN countries like Malaysia and Indonesia the limits stands at 5ppb. Quite interestingly the survey revealed that Singapore has put a stipulation of 0% Aflatoxin (below the traceable limits) for any import of groundnut in the country. Now given the present agricultural scenario of the country, exporters from India consider the Aflotixin levels specified by Singapore as a non tariff barrier The above is a clear case of setting up a standard without any scientific justification and risk assessment which is advocated in the SPS Agreement. Countries are using the liberty of adopting higher standards in SPS Agreement as non tariff barriers to protect their interests. Exporting countries should take this up as bilaterally for future trade negotiations.
5. Manufacturing and operations
The company is set up in Tamil Nadu. After the production the packaging is done in the company, this is followed by labeling. The peanuts are exported to Malaysia as raw materials for further processing. There are two possibilities of procurement of materials. First is contract farming. In this case we buy land and then give the farmers that land for cultivation of peanuts. This is done on either contract basis or salary basis. Second possibility is that we can procure the raw materials straight from mandis. The evaluation of both the methods is done on the basis of value generation to the supply side of the business. Looking at the demand of peanuts in Malaysia and the current export of peanuts form India, the capacity is not very large. The current capacity will range from about 4000 to 6000 tonns per year. The demand will decide the future expansion of the plant. As of now there are no plans for expansions. The quality of peanut produced in India is better than that of Vietnam, which is currently the major exporter to this country. The taste of the peanuts does not vary to a great extent and there is no reason for localization as of now.
Quality factor I. Quality Factors – General
Peanuts shall be safe and suitable for processing for human consumption. Peanuts shall be free from abnormal flavours, odours, living insects and mites. II. Quality Factors – Specific ? Moisture Content Maximum Level Peanuts in-pod 10% Peanut kernels 9.0%
Lower moisture limits should be required for certain destinations in relation to the climate, duration of transport and storage. Governments accepting the Standard are requested to indicate and justify the requirements in force in their country. ? Mouldy, rancid or decayed kernels ? Mouldy kernels are defined as kernels with mould filaments visible to the naked eye. 0.2% m/m max mouldy kernels are permissible. ? Decayed kernels are defined as those showing visibly significant decomposition. ? Rancid kernels are defined as those which have undergone oxidation of lipids (should not exceed 5 meq active oxygen/kg) or the production of free fatty acids (should not exceed 1.0%) resulting in the production of disagreeable flavours. ? Organic and inorganic extraneous matter: is defined as organic or inorganic components other than peanuts and includes stones, dust, seeds, stems, etc. ? Filth Impurities of animal origin (including dead insects) 0.1% m/m max ? Other organic and inorganic extraneous matter Peanuts in-pod 0.5% m/m max Peanut kernels 0.5% m/m max ? Contaminants ? Heavy Metals The products covered by the provisions of this standard shall be free from heavy metals in amounts which may represent a hazard to human health. ? Pesticide Residues Peanuts shall comply with those maximum residue limits established by the competent authority.
Hygiene factor ? To the extent possible in good manufacturing practice, the product shall be free from objectionable matter. ? When tested by appropriate methods of sampling and examination, the product: ? Shall be free from microorganisms in amounts which may represent a hazard to health. ? shall be free from parasites which may represent a hazard to health; ? Shall not contain any substance originating from microorganisms, including fungi, in amounts which may represent a hazard to health.
6. Financials and various institutes involved
S.NO.
NAMES OF INSTITUTION
NATURE OF SERVICES PROVIDED Consulting in Energy Conservation, Pollution Control, Cost reduction, I.T., QMS/HACCP/ISO-9000 /ISO-14000 Certification, various studies and production engineering management studies and training.
1.
National Productivity Council
2.
Small Industries Service Institute, Karnal
Training in Export Marketing, EDP/MDPs, Consultancy
3.
Directorate of Industries/District Industries Centre of State
State Govt. Industries regulatory/Monitoring agency Financial assistance, Grant in aids
4.
Small Industries Development Bank of India (SIDBI)
5. 6.
Nationalised Banks Indian Institute of Packaging
Financial Assistance Consultation & Training for packaging
7.
Director General Foreign Trade
Export/Import code number for export items Export Credit Insurance
12.
Export Credit Guarantee
Corporation 13. Export Inspection Council Export Inspection
Packaging guideline
Peanuts shall be packaged in such manner which will safeguard the hygienic, nutritional, technological, and organoleptic qualities of the product. Packaging will be sound, clean, dry, and free from insect infestation or fungal contamination. Packing material shall be made of substances which are safe and suitable for their intended use, including new clean jute bags, tinplate containers, plastic or paper boxes or bags. They should not impart any toxic substance or undesirable odour or flavour to the product. When the product is packaged in sacks, these must be clean, sturdy, and strongly sewn or sealed. Restrictions and limitations on packaging materials (1) No person shall import, manufacture, advertise for sale or sell or use or cause or permit to be used in the preparation, packaging, storage, delivery or exposure of food for sale, any package, appliance, container or vessel which yields or could yield to its contents, any toxic, injurious or tainting substance, or which contributes to the deterioration of the food. (2) No person shall import, manufacture, advertise for sale or sell any package, appliance, container or vessel made of enamel or glazed earthenware that is intended for use in the preparation, packaging, storage, delivery or exposure of food for sale and is either capable of imparting lead, antimony, arsenic, cadmium or any other toxic substance to any food prepared, packed, stored, delivered or exposed in it, or is not resistant to acid unless the package, appliance, container or vessel satisfied the test described in the Thirteenth Schedule. (Appendix C). (3) No person shall import, manufacture or advertise for sale or sell or use in the preparation, packaging, storage, delivery or exposure of food for sale, any rigid or semi-rigid package,
appliance, container or vessel, made of polyvinyl chloride which contains more than 1 mg/kg of vinyl chloride monomer. (4) No person shall import, prepare or advertise for sale or sell any food in any rigid or semirigid package, appliance, container or vessel made of polyvinyl chloride if the food contains more than 0.05mg/kg of vinyl chloride monomer. (5) No person shall use, or cause or permit to be used, in the preparation, packaging, storage, delivery or exposure for sale of any food, any package, appliance, container or vessel that had been used or intended to be used for any non-food product. (6) Recycling of the following packages prohibited: ? of any sugar, flour or meal, any sack that has previously been used for any purpose ? of any edible fat or edible oil, any bottle or metal container, than silos and tankers for edible fat and edible oil, that has previously been used for any purposes ? of any food of non-swine origin, any package, appliance; container or vessel that is intended for use or has been used for any product of swine origin (sus scrofa) ? of any food, other than that packaged in an extra wrapper, any plastic bottle that has previously been used for any purpose; ? of any food, other than alcoholic beverage and shandy (type of Malaysian beer), any bottle that has previously been used for alcoholic beverage or shandy. ? of any milk, soft drink, alcoholic beverage or shandy, any glass bottle that has previously been used for another food; ? of any vegetable, fish or fruit, any box or crate that has previously been used for another food ? of any polished rice, any gunny sack that has previously been used for another food (7) Use of damaged package prohibited
Labelling guideline
Language to be used ? Where the food is produced, prepared or packaged in Malaysia, the language to be used is Bahasa Malaysia and in the case of imported food, the language may be in Bahasa Malaysia or English, and in either case may include translation thereof in any other language. Particulars in labelling ? A statement of the minimum net weight or volume or the number of the Content of the package ? In the case of imported food, the name and business address of manufacturer or packer or the owner of the rights of manufacture, or the agent of any of them, and the name and business address of the importer in Malaysia and the name of the country of the origin of the food. Please note that for the above purpose, a telegraphic or code address or an address at a Post Office, or the name of the company or the trade name of the manufacturer, packer, importer or seller appearing on any disc or cap or other device for sealing any package of is not sufficient.
Form and manner of labelling ? The particulars required above shall appear conspicuously and prominently in the label. ? All particulars to appear on a label shall be written in no smaller than 10 point lettering and with equal prominence with any other matter appearing on or attached to the package. ? All lettering shall appear in a color that contrast strongly with its background ? Every label shall be legible and durably marked either on the material of the package or on material firmly or permanently attached to the package.
Date marking ? In relation to package of food, it means a date permanently marked or embossed on the package, or in the label on the package, of any food signifying the expiry date or the date of minimum durability of that food, as the case may be. ? Where the validity of the date marking of a food to which this regulation applies is dependent on its storage, the storage direction of that food shall also be required to be borne on its label. ? The date marking required by this regulation shall be in capital bold-face lettering of a non-serif character not smaller than 6 point. Matter forbidden on any label ? No descriptive matter appearing on or attached to or supplied with any package of food shall include any comment on, reference to or explanation of, any statement or label required by these Regulations to be borne on any package of food if such comment, reference, or explanation either directly or by implication, contradicts, qualifies or modifies the statement or the content of that label. ? Words to indicate grading, quality or superiority or any other words of similar meaning shall not appear on the label of any package of food unless such description of quality grading conform to those established by the relevant authorities responsible for such grading; and where such words appear on the label, it shall be presumed that the food is in compliance with the requirements established by the relevant authorities in respect of that quality grading. ? No label which describes any food shall include the word "pure" or any other words of the same significance unless the food is of the strength, purity or quality prescribed by these Regulations and is free from any other added substance apart from those essential in the processing of such food; and there is no expressed stipulation in these Regulations prohibiting the inclusion of such word in the label in respect of that food.
Requirements Specific to Nutritional Labelling ? In these Regulations, “nutritional labelling", in relation to a package of food, means a description intended to inform the consumer of the nutrient content of a food. ? There shall be written on the label of the food – a. the amount of energy, expressed in kilocalorie (kcal) or kilojoules (KJ) or both per 100g or 100 ml or per package if the package contains only a single portion and per serving as quantified on the label; and b. The amount of protein, available carbohydrate (that is carbohydrate excluding dietary fibre) and fat, expressed in g per 100g or per package if the package contains only a single portion and per serving as quantified on the label.
Limitation of the business plan
During analysis of business operations various limitation have been identified and are discussed below :
i) Product and Raw materials ii) Technology iii) Marketing v) Human resource and training vi) Finance vii) Business development services viii) Infrastructural facilities ix) Govt. policy x) Promotional aspect-Association/others
doc_750118714.docx
Document that explains the business plan of export peanut to malaysia.
International Business
A Business Plan
Peanut Export to Malaysia
Southern Exports Pvt. Ltd.
1. Executive summary
Product overview Groundnut is very important crop around the globe for its nutritional and trade values. It is also a poor man’s crop as it can be grown fairly well even on marginal soils with less fertility, and low moisture conditions. Groundnuts can also be grown in large quantity with the use of high amount of inputs such as fertilizers and pesticides, high yielding cultivars, and irrigation. As a result of varying farming situations, there is a large variation in the productivity levels of groundnut around the world. In countries like the United States where the crop is grown on large farms with assured inputs, productivity levels are very high in comparison to a country like India where the crop is traditionally grown by small-holding farmers, on less fertile soil, in rain fed conditions, with low amount of inputs. Many Asian and African countries suffer from a typical productivity problem due to reasons such as moisture stress, poor soil fertility, pests and diseases, and low input levels. Also, in most of these countries groundnut is grown on marginal lands. Such a situation demands development of cultivars that can withstand drought and resist the attack of pests and diseases. While in Africa, government priorities lead to the decline of groundnut cultivation, South American groundnut production was hit by the shift from groundnut to more competitive oilseed crop soybeans by the industries. All of these factors point to the fact that it needs a careful planning and concerted efforts to keep the balance of high level of production and trade of economically and nutritionally important crop like groundnut. The groundnut has a tremendous potential to offer in mitigating the protein malnutrition in poverty ridden countries of the world. The business plan consists of exporting peanuts to Malaysia. Looking at the consumption pattern of the people and the demand of this product, the growth opportunity is very large in this market.
The major exporters of peanut are as follows:
2. Business history
Peanut Production China is the world's largest producer of peanuts, with a two-crop annual production of about 10 million metric tons. Following closely is India with 7.5 million metric tons, also with two crops annually. The peanuts from these two countries are mostly used for cooking oil, but do export edible peanuts when market conditions and exchange rates are favourable. Next in line is the United States with 1.8 million metric tons. About one-third of the U.S. production is exported as edible kernels. Indonesia produces about 1 million metric tons, mostly for domestic markets. Then comes Argentina, having recently claimed the title of the largest export edible marketer, producing .7 million metric tons. Argentina grows peanuts strictly for export with almost no domestic need for them. Other countries producing export peanuts include: Burma (.55 million MT), Senegal (.55 million MT), Zaire (.56 million MT), Nigeria (.35 million MT), Vietnam (.34 million MT) and South Africa (.17 million MT).
Major exporter During the past 25 years, countries vying for a share in the edible peanut market have changed completely, while production has increased slightly or, in some years, held steady. The key word in the future of export peanuts will be globalization. The past shows us that things are constantly changing. The top exporters in 1970, in order, were Nigeria, Niger, South Africa, Sudan, USA, India, China and Argentina. In 1985, the rankings in order of exports were USA, China, Argentina, India, South Africa, Sudan and Malawi. In 1998-99, the U.S. Foreign Agricultural Service estimates that the world's peanut exporters are, in order, Argentina (27%), USA (26%), China (18%), India (16%), Vietnam (11%) and South Africa (2%). As the players change, so do the export issues. In 2006 India's Stand as an Exporting Country for product Ground-nuts shelled, not roasted or cooked was 6th with the value of us $230,750,00. In 2006 India had sold 42,877 metric tons ground nuts. Argentina was the top producer with the value of us $329,210. Although India is second largest producer of ground nuts export is lower because of higher domestic consumption.
India's Stand as an Exporting Country for product Ground-nuts shelled, not roasted or cooked (HSCODE- 120220) in 2006
India’s Production of Ground Nut Indian Groundnuts are available in different varieties Bolds or Runners, Javas or Spanish and Red natals and rich nutty flavour, Sweet taste, crunchy texture and a relatively longer shelf life. Groundnuts in India are available throughout the year due to a two-crop cycle harvested in March and October. On an average, India produces 7-8 million tonnes of groundnuts (unshelled) every year. in 2006 India’s production of ground nut was 79,90,000 tons. In fact, considering the current export figures, India has a much larger potential to supply high quality groundnuts to the international buyer. But due to high rate of domestic consumption share in the global market is lower.
Indian Production of GROUNDNUT( HSCODE- 12021001) in 2006
State Gujarat Andhra Pradesh Tamil Nadu Karnataka Rajasthan Maharashtra Madhya Pradesh Others Orissa Uttar Pradesh Total
Production In Tonnes 3390000.00 1370000.00 1100000.00 670000.00 490000.00 410000.00 230000.00 130000.00 110000.00 90000.00 7,990,000
Percentage Share in Total 42.43 17.15 13.77 8.39 6.13 5.13 2.88 1.63 1.38 1.13
Source : National Horticulture Board
Product definition as per ITC HS code Peanuts ITC HS code is 12022010. 12 stand for Chapter 12: Oil Seeds and Oleaginous Fruits; Miscellaneous Grains, Seeds and Fruit; Industrial or Medicinal Plants; Straw and Fodder. 1202 stand for Ground-nut, not roasted or otherwise cooked, whether or not shelled or broken. 120220 stand for ground nut Shelled, whether or not broken. 12022010 stand for Kernels, H.P.S.
Malaysian culture and food habits The continent of Asia is a melting pot of different cultures, wonders and attractions. The country of Malaysia is situated in the heart of Asia. The population in this country is very mixed comprising of Malays, Chinese and Indians. Malaysia is one of the leading tourist destinations and is very popular for its towering skyscrapers, natural wonders, beautiful beaches and some of the great diving spots in the world. The people of Malaysia speak Malay (Bahasa Melayu) and this is the official language. English is widely spoken in the country also. You will come across various ethnic groups who speak various languages and dialects. Islam is the official language followed here but other religions are freely practiced here. The people of Malaysia love their food. There are numerous restaurants in Malaysia that serve world class cuisine. You will find a range of Chinese, Malaysia, Japanese and Thai Cuisine. Some of the popular restaurants include Amy's Malaysian Restaurant, Golden Dragon, Mayflower, Panda and Rasa Sayang. Satay with Peanut Sauce is a very popular dish in Malaysia. It is the mainstay of Malaysian Cuisine where beef or chicken is served in spicy peanut sauce is served. Nasi Lemak is a morning favorite among the people of Malaysia. The dish comprises of rice served with coconut milk and served with chilly pate, anchovies, peanuts and cucumber.
3. Market research
Market overview Groundnut is the 13th most important food crop of the world. It is the world's 4th most important source of edible oil and 3rd most important source of vegetable protein. Groundnut seeds contain high quality edible oil (˜ 50%), easily digestible protein (˜ 25%) and carbohydrates (˜ 20%). Groundnut is grown in nearly 100 countries. India is one of the major exporting country of groundnuts after china and its export has increased from Rs. 513.68 Crores (USD Million 116.03) in 2005-06 to Rs. 798.46 Crores (USD Million 177.12) in 2006-07. The Major Market for Indian groundnuts are Indonesia, Malaysia, Philippines, U.K and Singapore. The battle for a share of the world's market of edible peanuts is constantly changing. World production now averages nearly 26.7 million metric tons annually. While much of the production is consumed as peanut oil, a lucrative trade in edible peanuts involves about 1.25 million metric tons. As the trade of peanuts has increased, the market is mostly affected by the following factors: price, quality, on-time service to buyers and ample supplies for the market.
Market potential In Malaysia growing consumption of peanuts in various foods application increases demand of peanuts. Due to lower production of peanuts they have to import large quantity of peanuts in the country. Previously, Vietnam shipped 10,000 – 13,000 tonnes of peanut to Malaysia. However, unlike Chinese and Indian peanuts, Vietnamese peanuts have inconsistent quality, bad preserving techniques and unhygienic processing. But, Malaysian people are keener on Vietnamese peanuts because of better taste. Vietnam can export more than 10,000 tonnes of peanut to this market because this is a favourite dish of Malaysians.
S.No. 1. 2. 3. 4. 5. 6. 7. 8. Values in US$ Million %Growth Total export of commodity %Growth %Share of country (1 of 3) Total export to country %Growth
\Year
2002-2003
2003-2004 7.24
2004-2005 9.42 30.11
2005-2006 15.83 68.16 70.08 15.37 22.59 1,161.86 7.18 1.36 44.2735
2006-2007 19.18 21.14 106.70 52.25 17.98 1,303.29 12.17 1.47 45.2849
69.66
60.74 -12.80
10.39 749.37 892.76 19.13 0.81 48.3953 45.9516
15.50 1,084.06 21.43 0.87 44.9315
%Share of commodity (1 of 6) Exchange rate: (1US$ = Rs.)
(source –apida)
Export to Malaysia increase three times in four year shows us export potential of peanuts to this market. Unlike developed market in Malaysian government rules are also favourable, which make trade more conducive. Currently India is exporting only small portion of Malaysian demand so there will be good growth potential for trade.
4. Legal decisions
Tariff duty Export of peanuts Shelled in Malaysia attracts custom duty as under;
Final Bound Duties HS_Code Product MFN Applied Duties Import Duties [Duty [Duty [Share [Duty [AVG][Max]- [Binding in [AVG][Max]Free in Free in in %]- Free in FBD FBD %]-FBD MFN MFN %]-FBD %]-MFN Imp %]-Imp 4.30 -100.00 1.70 69.20 20.00 1.30 81.40
120210
GROUNDNUT IN SHELL (HPS) 32.20
120210
GROUNDNUT IN SHELL NES
32.20
4.30
--
100.00
1.70
69.20
20.00
1.30
81.40
200811
GROUNDNUTS PRPD/PRSVD
151.10
11.80
--
100.00
3.80
63.90
80.00
0.60
81.10
(source –apida)
Non-Tariff Measures While market access would improve for export of peanuts on account of reduction of import duties, it may be decrease due to the application of non-tariff measures. It is important to define non-tariff barriers. Any restriction imposed on the free flow of trade is a trade barrier. Trade barriers can either be tariff barriers, that is levy of ordinary customs duties within the binding commitments undertaken by the concerned country in accordance with Article II of GATT or non tariff barriers that is any trade barriers other than the tariff barriers. Non-tariff barriers can take various forms Some of these measures include import quotas, licensing, exchange and other financial controls, prohibitions, discriminatory bilateral agreements, variable levies, advance deposit requirements, antidumping duties, subsidies and other aids, government procurement policies, government industrial policy and regional development measures, competition policies, immigration policies, customs procedures and administrative practices, technical barriers to trade, and sanitary and phytosanitary measures. But for broadly peanuts import may be restricted due to following non-tariff measures.
? Import Policy Barriers One of the most commonly known non-tariff barriers is the prohibition or restrictions on imports maintained through the import licensing requirements. GATT Agreement requires Members not to impose any prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures. Any form of import licensing (other than an automatic license) is, therefore, to be considered as an import restriction. Certain restrictions on imports, however, can be imposed in accordance with various provisions of the GATT. These include restrictions on grounds of safety, security, health, public morals etc. GATT Agreement provides for certain general exceptions on grounds of protection of: ? public morals ? human, animal or plant life or health, ? National treasures of artistic, historic or archaeological value etc.
Developing country Members has often faced more restrictive treatment in the developed countries who have often raised barriers against developing countries to protect their own market.
? Standards, Testing, Labelling & Certification Requirements Prima-facie Standards, Testing, Labelling and Certification requirements are insisted upon for ensuring quality of goods seeking an access into the domestic markets but many countries use them as protectionist measures. The impact of these requirements is felt more by the purpose and the way in which these are used to regulate trade. Two of the covered agreements under the WTO namely the Agreement on the Application of Sanitary & Phytosanitary Measures (SPM) and the Agreement on Technical Barriers to Trade (TBT), specifically deal with the trade related measures necessary to protect human, animal or plant life or health, to protect environment and to ensure quality of goods.
The SPM Agreement gives a right to take sanitary and phytosanitary measures necessary for the protection of human, animal or plant life or health, provided: ? such measures are not inconsistent with the provisions of the Agreement; ? They are applied only to the extent necessary; ? They are based on scientific principles and are not maintained without sufficient scientific evidence; ? They do not arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail including between their own territory and that of other Members, and ? They are not applied in a manner which would constitute a restriction on international trade. The trade of developing country Members has often faced more restrictive treatment in the developed countries who have often raised barriers against developing countries on one pretext or the other. Some of the non-tariff barriers falling in this category are ban on import of goods like textiles and leather treated with azo-dyes and pentachlorophenol, ban on use of all hormones, natural and synthetic in livestock production for export of meat and meat products, stipulation regarding pesticides and chemicals residues in tea, rice and wheat etc., and requirement of on-board cold treatment for fruits and vegetables export.
? Export Subsidies & Domestic Support Both export subsidies and domestic support have a great bearing on the trade of other countries. While export subsidies tend to displace exports from other countries into the third country markets, the domestic support acts as a direct barrier against access to the domestic market. Generally the developing countries can hardly find resources to grant subsidies or domestic support. But developed countries like the Members of the European Union and Japan have been heavily subsidising their agricultural sector through schemes like export refunds, production
support system and other intervention measures. All this export subsidises and domestic support to farmer makes export of peanuts to developed country expensive.
Specific Non tariff barrier for export of peanuts in Malaysia Aflatoxin contamination of groundnut is a widespread problem in most groundnut-producing countries. It is a type of a fungus which is a natural syndrome for any groundnut farmed under rain fed conditions. The Aflatoxin contamination does not affect crop productivity but it makes the produce unfit for consumption as toxins are injurious to health. Most countries specify the Aflatoxin limit for the exports of groundnut. At present the permissible limit of Aflatoxin for groundnuts in the European union is 2 ppb whereas in case of the ASEAN countries like Malaysia and Indonesia the limits stands at 5ppb. Quite interestingly the survey revealed that Singapore has put a stipulation of 0% Aflatoxin (below the traceable limits) for any import of groundnut in the country. Now given the present agricultural scenario of the country, exporters from India consider the Aflotixin levels specified by Singapore as a non tariff barrier The above is a clear case of setting up a standard without any scientific justification and risk assessment which is advocated in the SPS Agreement. Countries are using the liberty of adopting higher standards in SPS Agreement as non tariff barriers to protect their interests. Exporting countries should take this up as bilaterally for future trade negotiations.
5. Manufacturing and operations
The company is set up in Tamil Nadu. After the production the packaging is done in the company, this is followed by labeling. The peanuts are exported to Malaysia as raw materials for further processing. There are two possibilities of procurement of materials. First is contract farming. In this case we buy land and then give the farmers that land for cultivation of peanuts. This is done on either contract basis or salary basis. Second possibility is that we can procure the raw materials straight from mandis. The evaluation of both the methods is done on the basis of value generation to the supply side of the business. Looking at the demand of peanuts in Malaysia and the current export of peanuts form India, the capacity is not very large. The current capacity will range from about 4000 to 6000 tonns per year. The demand will decide the future expansion of the plant. As of now there are no plans for expansions. The quality of peanut produced in India is better than that of Vietnam, which is currently the major exporter to this country. The taste of the peanuts does not vary to a great extent and there is no reason for localization as of now.
Quality factor I. Quality Factors – General
Peanuts shall be safe and suitable for processing for human consumption. Peanuts shall be free from abnormal flavours, odours, living insects and mites. II. Quality Factors – Specific ? Moisture Content Maximum Level Peanuts in-pod 10% Peanut kernels 9.0%
Lower moisture limits should be required for certain destinations in relation to the climate, duration of transport and storage. Governments accepting the Standard are requested to indicate and justify the requirements in force in their country. ? Mouldy, rancid or decayed kernels ? Mouldy kernels are defined as kernels with mould filaments visible to the naked eye. 0.2% m/m max mouldy kernels are permissible. ? Decayed kernels are defined as those showing visibly significant decomposition. ? Rancid kernels are defined as those which have undergone oxidation of lipids (should not exceed 5 meq active oxygen/kg) or the production of free fatty acids (should not exceed 1.0%) resulting in the production of disagreeable flavours. ? Organic and inorganic extraneous matter: is defined as organic or inorganic components other than peanuts and includes stones, dust, seeds, stems, etc. ? Filth Impurities of animal origin (including dead insects) 0.1% m/m max ? Other organic and inorganic extraneous matter Peanuts in-pod 0.5% m/m max Peanut kernels 0.5% m/m max ? Contaminants ? Heavy Metals The products covered by the provisions of this standard shall be free from heavy metals in amounts which may represent a hazard to human health. ? Pesticide Residues Peanuts shall comply with those maximum residue limits established by the competent authority.
Hygiene factor ? To the extent possible in good manufacturing practice, the product shall be free from objectionable matter. ? When tested by appropriate methods of sampling and examination, the product: ? Shall be free from microorganisms in amounts which may represent a hazard to health. ? shall be free from parasites which may represent a hazard to health; ? Shall not contain any substance originating from microorganisms, including fungi, in amounts which may represent a hazard to health.
6. Financials and various institutes involved
S.NO.
NAMES OF INSTITUTION
NATURE OF SERVICES PROVIDED Consulting in Energy Conservation, Pollution Control, Cost reduction, I.T., QMS/HACCP/ISO-9000 /ISO-14000 Certification, various studies and production engineering management studies and training.
1.
National Productivity Council
2.
Small Industries Service Institute, Karnal
Training in Export Marketing, EDP/MDPs, Consultancy
3.
Directorate of Industries/District Industries Centre of State
State Govt. Industries regulatory/Monitoring agency Financial assistance, Grant in aids
4.
Small Industries Development Bank of India (SIDBI)
5. 6.
Nationalised Banks Indian Institute of Packaging
Financial Assistance Consultation & Training for packaging
7.
Director General Foreign Trade
Export/Import code number for export items Export Credit Insurance
12.
Export Credit Guarantee
Corporation 13. Export Inspection Council Export Inspection
Packaging guideline
Peanuts shall be packaged in such manner which will safeguard the hygienic, nutritional, technological, and organoleptic qualities of the product. Packaging will be sound, clean, dry, and free from insect infestation or fungal contamination. Packing material shall be made of substances which are safe and suitable for their intended use, including new clean jute bags, tinplate containers, plastic or paper boxes or bags. They should not impart any toxic substance or undesirable odour or flavour to the product. When the product is packaged in sacks, these must be clean, sturdy, and strongly sewn or sealed. Restrictions and limitations on packaging materials (1) No person shall import, manufacture, advertise for sale or sell or use or cause or permit to be used in the preparation, packaging, storage, delivery or exposure of food for sale, any package, appliance, container or vessel which yields or could yield to its contents, any toxic, injurious or tainting substance, or which contributes to the deterioration of the food. (2) No person shall import, manufacture, advertise for sale or sell any package, appliance, container or vessel made of enamel or glazed earthenware that is intended for use in the preparation, packaging, storage, delivery or exposure of food for sale and is either capable of imparting lead, antimony, arsenic, cadmium or any other toxic substance to any food prepared, packed, stored, delivered or exposed in it, or is not resistant to acid unless the package, appliance, container or vessel satisfied the test described in the Thirteenth Schedule. (Appendix C). (3) No person shall import, manufacture or advertise for sale or sell or use in the preparation, packaging, storage, delivery or exposure of food for sale, any rigid or semi-rigid package,
appliance, container or vessel, made of polyvinyl chloride which contains more than 1 mg/kg of vinyl chloride monomer. (4) No person shall import, prepare or advertise for sale or sell any food in any rigid or semirigid package, appliance, container or vessel made of polyvinyl chloride if the food contains more than 0.05mg/kg of vinyl chloride monomer. (5) No person shall use, or cause or permit to be used, in the preparation, packaging, storage, delivery or exposure for sale of any food, any package, appliance, container or vessel that had been used or intended to be used for any non-food product. (6) Recycling of the following packages prohibited: ? of any sugar, flour or meal, any sack that has previously been used for any purpose ? of any edible fat or edible oil, any bottle or metal container, than silos and tankers for edible fat and edible oil, that has previously been used for any purposes ? of any food of non-swine origin, any package, appliance; container or vessel that is intended for use or has been used for any product of swine origin (sus scrofa) ? of any food, other than that packaged in an extra wrapper, any plastic bottle that has previously been used for any purpose; ? of any food, other than alcoholic beverage and shandy (type of Malaysian beer), any bottle that has previously been used for alcoholic beverage or shandy. ? of any milk, soft drink, alcoholic beverage or shandy, any glass bottle that has previously been used for another food; ? of any vegetable, fish or fruit, any box or crate that has previously been used for another food ? of any polished rice, any gunny sack that has previously been used for another food (7) Use of damaged package prohibited
Labelling guideline
Language to be used ? Where the food is produced, prepared or packaged in Malaysia, the language to be used is Bahasa Malaysia and in the case of imported food, the language may be in Bahasa Malaysia or English, and in either case may include translation thereof in any other language. Particulars in labelling ? A statement of the minimum net weight or volume or the number of the Content of the package ? In the case of imported food, the name and business address of manufacturer or packer or the owner of the rights of manufacture, or the agent of any of them, and the name and business address of the importer in Malaysia and the name of the country of the origin of the food. Please note that for the above purpose, a telegraphic or code address or an address at a Post Office, or the name of the company or the trade name of the manufacturer, packer, importer or seller appearing on any disc or cap or other device for sealing any package of is not sufficient.
Form and manner of labelling ? The particulars required above shall appear conspicuously and prominently in the label. ? All particulars to appear on a label shall be written in no smaller than 10 point lettering and with equal prominence with any other matter appearing on or attached to the package. ? All lettering shall appear in a color that contrast strongly with its background ? Every label shall be legible and durably marked either on the material of the package or on material firmly or permanently attached to the package.
Date marking ? In relation to package of food, it means a date permanently marked or embossed on the package, or in the label on the package, of any food signifying the expiry date or the date of minimum durability of that food, as the case may be. ? Where the validity of the date marking of a food to which this regulation applies is dependent on its storage, the storage direction of that food shall also be required to be borne on its label. ? The date marking required by this regulation shall be in capital bold-face lettering of a non-serif character not smaller than 6 point. Matter forbidden on any label ? No descriptive matter appearing on or attached to or supplied with any package of food shall include any comment on, reference to or explanation of, any statement or label required by these Regulations to be borne on any package of food if such comment, reference, or explanation either directly or by implication, contradicts, qualifies or modifies the statement or the content of that label. ? Words to indicate grading, quality or superiority or any other words of similar meaning shall not appear on the label of any package of food unless such description of quality grading conform to those established by the relevant authorities responsible for such grading; and where such words appear on the label, it shall be presumed that the food is in compliance with the requirements established by the relevant authorities in respect of that quality grading. ? No label which describes any food shall include the word "pure" or any other words of the same significance unless the food is of the strength, purity or quality prescribed by these Regulations and is free from any other added substance apart from those essential in the processing of such food; and there is no expressed stipulation in these Regulations prohibiting the inclusion of such word in the label in respect of that food.
Requirements Specific to Nutritional Labelling ? In these Regulations, “nutritional labelling", in relation to a package of food, means a description intended to inform the consumer of the nutrient content of a food. ? There shall be written on the label of the food – a. the amount of energy, expressed in kilocalorie (kcal) or kilojoules (KJ) or both per 100g or 100 ml or per package if the package contains only a single portion and per serving as quantified on the label; and b. The amount of protein, available carbohydrate (that is carbohydrate excluding dietary fibre) and fat, expressed in g per 100g or per package if the package contains only a single portion and per serving as quantified on the label.
Limitation of the business plan
During analysis of business operations various limitation have been identified and are discussed below :
i) Product and Raw materials ii) Technology iii) Marketing v) Human resource and training vi) Finance vii) Business development services viii) Infrastructural facilities ix) Govt. policy x) Promotional aspect-Association/others
doc_750118714.docx