----------------------- Page 1---------------------- VALUEVALUE ADDITIONADDITION ININ PAKISTANPAKISTAN CHALLENGES AND OPPORTUNITIES Prof. Dr.Prof. Dr.

FaFaqqqqirir MuhammadMuhammad AAnnjjjj umum Director GeneralDirector General NationalNational InstituteInstitute ofof FoodFood ScienceScience && TechnologyT echnology University of Agriculture 1 Faisalabad, Pakistan ----------------------- Page 2----------------------Contents Value Addition Food Processing Food Processing-Worldwide Food Processing-Pakistan Scenario of Major Food Crops Challenges and Opportunities ----------------------- Page 3----------------------Value Addition Value addition process of increasing the economic value and consumer appeal of an agricultural commodity It is a production/marketing strategy driven by customer needs andand preferencespreferences

Valueadded is used to characterize food pproducts converted from raw materials through processes that give the resulting product an incremental value in the market place ither throughthrough higherhigher priceprice oror expandedexpanded marketmarket Exampples of valueadded pproducts Jams,, Ketchup,p, sqquashes,, cheeses and precooked meats are considered 3 ----------------------- Page 4----------------------Why Value Addition? Make more money: value added agricultural product has more market value than raw commodity

 Meet changing tastes and preferences of consumers convenience, quality, safety, health, variety, price, social and environmental consciousness Compete by differentiating a product in a highly competitive market 4 ----------------------- Page 5----------------------Food Processing and Value Addition Food processing involves any type of value to the agricultural produce starting at the post harvest level The value of farm products can be increased through any of the route singly or in combination Biologgical Cleaning&cooling ng Processing ingg Distributing ing Churning beling CulturingCulturing ChemicaChemica l Physical

addition

Extracti Dryy Smok La PP

ackkagiing Grinding Hulling ----------------------- Page 6----------------------Traditional Approach to Food Processing Small Farmers Retailing Middle Man Process Large Scale Process ----------------------- Page 7----------------------Food Processing: Worldwide The size of global processed food industry is estimated to be valued around US $3.5 trillion and accounts for threefourth of Middle Man SSmallll SScalle

the global food sales MostMost ofof thethe growthgrowth isis takingtaking placeplace inin developingd eveloping countriescountries inin Eastern Europe, Asia and AsiaPacific, which are experiencing increase in population The huge market in ASEAN countries alone, with over 550 million people, is a vast potential waiting to be untapped Despite its large size, only 6% of processed foods are traded acrossacross bordersborders comparedcompared toto 1616%% ofof majormajor bulkbulk agriculturalagricultural commodities 7 ----------------------- Page 8----------------------Food Processing: Worldwide Employment in Food Sector Fortune 500 indicate Food Sector is ggrowingg lion the past 5 years MajorMajor foodfood processingprocessing industriesindustries are American and European CConveniience prodducts suchh as dried instant soups, reconstituted fruits and jjuices, onbillion shelf cooking meals are becoming popular throughout thethe worldworld 8 ----------------------- Page 9----------------------Food Processing: Worldwide Japan is the largest food processing market in the Asian region followed by India and China One of the most technically advanced foodprocessing industry globally is Australia as the products produced are of iintternatitionall sttanddardds hhaviing comparatitivelly llow priices Countries in the SubSahara African region, Latin America andd some parts off Asiia contiinue to bbe on thhe llowerendd off technology for competence in food items Europe, North America, and Japan are on the higherend of technology, with a sharper shift towards convenience and Food Market USUS = USUS $$ 100100 billi India: US $ 69.4 billion 15.9 % annuallyy for EEurope: 22.55 milliil US: 12 million

diet foods. 9 ----------------------- Page 10----------------------% Growth 2 2 5 3 0 0 Pipeliness Engineerinng, Constructionn Pettroleum Refiningg Mining, Crude-Oil productionn OOil and Gas Equipment, Servicess Energyy F Coonstruction and FFarm Machineryy Metalss FFood Productionn o o Induustrial Machineryy Netwwork and Other CCommunicationss a Railroadss s t Health Caree: Insurance andd Managed Caree Financiaal Data Servicess g P Health Caree: Pharmacy andd Other Servicess Internet Servicees and Retailingg r r MMedical Productss and Equipmentt o o EElectronics, Electtrical Equipmentt w T c Food Servicess Food Connsumer Productss e r p s i I 2 n i n o e Food aand Drug Storess s s Hoousehold and Peersonal Productss Chemicalss d 5 0 5 0 5 0 5 0 1 1 1 1 2

Scienntific, Photograpphic, and Controll N D 0 d U u S 0 T : Aerospaace and Defensee R 8 s Y t F r i Wholesalers: Electronics and OOffice Equipmentt o e o Airliness Wholesaalers: Diversifiedd r s r t u d Teleccommunicationss Sppecialty Retailerss Beveragess n e w Entertainmentt i Computers, OOffice Equipmentt Packagging, Containerss d Securitiess e Insurance: Life, Health (mutual)) l Health Care: MMedical Facilitiess Wholesaleers: Health Caree W Innformation Technology Servicess g PPharmaceuticalss Utilities: GGas and Electricc

5 0 0

Semicconductors and OOther Electronicc Generaal Merchandiserss Motor Vehicles and Partss Commercial Bankss Hotels, CCasinos, Resortss Insurance: Lifee, Health (stock)) Home Equipment, Furnishingss Real Estatee 1 Automotive Reetailing, Servicess

0 Insurancee: Property and CCasualty (stock)) Diverrsified Financialss ----------------------- Page 11----------------------Food Processing: Pakistan Food Industry is the 2nd largest in Pakistan Accountsfor27%ofitsvalueaddedproduction&16%ofthe totalemploymentinmanufacturingsector With an estimated 169 million consumers, Pakistan holds the worlds eight largest market More Pakistan 75% of rural based food manufacturers are in socalled informalinformal sectorsector (difficulty(difficulty inin accessingaccess ing rawraw materialmaterial, financefinance skills, knowledge & management) 1 1 ----------------------- Page 12----------------------Pakistans food sector is changing significantly wit an inclinedinclined shiftshift inin lifestyleslifestyles andand traditionaltrad itional eatingeating habitshabits h Average consumer spends 42% of ones income on food Retail sales of processed foods is expanding by 10 % per anum and currently are estimated at about US$1.4 billion, of whihichh iimportedd prodducts account ffor US$$325 milliillion Suppermarkets are ggainingg in ppoppularityy as a shoppppingg venue and now account for about 10% of all retail food sales than 1000 large scale food processing enterprises in

InIn addition,addition, PakistanPakistan nownow hostshosts numerousnumerous we sternwesternstylestyle fastfast food chains reflecting a rising popularity with such eating style ----------------------- Page 13----------------------Food Processing Units in Pakistan Typeofprocessingindustry FFruititsanddVVegettablble 00500 Cerealbased 00 Units 155155 1246 Employment 2323,5 45,0

EdibleEdibleoiloil 0034,000 Sugarsector 00 Livestock 5000 Total ,250

321321 427 68 1989

34,0 25,0 28, 154

Source:Source:EstimatesEstimatesbasedbasedononreportreportofofthetheAPOAPOMultiMulti tryCountryStudyStudyMissionMission onRuralBasedFoodProcessingIndustry,AbdulHafeezChaudhary,APO (2004).(Mt=Metrictons;Mnt=Milliontons;Mnl=Millionlitres) 13 ----------------------- Page 14---------------------- The ability of food processors at industrial level depends absolutely on the availability of raw materials Pakistan is a major producer of commodity and industrial crops (such as wheat, rice, sugarcane and oilseeds) Livestock and horticultural products are also important elements in aggriculture and pprovide additional raw materials for processing and export ----------------------- Page 15----------------------Cereals Wheat is the leading food grain in Pakistan, 9042 thousands hectareshectares areaarea underunder cultivationcultivation andand 8080%% fa rmersfarmers involvedinvolved (Federal Bureau of Statistics, 20092010) RiceRice isis secondsecond mostmost importantimportant cerealcereal cropcrop w ithwith 28832883 thousandthousand hectares of cultivated area (Federal Bureau of Statistics, 20092010) HarvestHarvest andand postpostharvestharvest losseslosses ofof wheatwheat anda nd otherother grainsgrains range between 1518% Vallue addddedd prodducts: bbiscuits, starchh, gllucose, etc. 15 ----------------------- Page 16----------------------Fruits and Vegetables Great demand in the international market, especially

mango, apples, dates and citrus 12% share in agriculture value addition Citrus and mango account for 48% of all fruits produced in Punjab BalochistanBalochistan producesproduces thethe secondsecond largestlargest volume volume ofof fruitsfruits, mainlymainly apples and dates High post harvest losses (2040%), Only 35% is being processed Value added products: Jams, squashes, syrups etc. ----------------------- Page 17----------------------Oil Seeds and Vegetable Oils Selfrelianceinedibleoilsduring1947to1960 Majorsourcesofedibleoilsare: Cottonseed SunflowerSunfloweroiloil Canolaoil Rapeseedoil Importstartedin1960;Nowthelocalproductionisonly29%and importis71%(Palmoilconstitutes>90%ofoilimports) Higherpercapitaconsumption:11.9Literspercapita

Valueaddedproducts:specialtyfats,shortenings,margarine 17 ----------------------- Page 18----------------------Sugarcane One of the major cash crop in Pakistan providing raw material for sugar based products Its share in value added of agriculture and GDP are 3.6 percent andand 00..88 percent,percent, respectivelyrespectively.. During 200910, area under 3 thousandthousand hectareshectares sugarcane cultivation was 94

Sugar industry waste like mud, molasses can be to produce several value added products using biotechnological techniques Value added products: d sugar, chipboard and paper 18 White sugar, brown sugar,

used

refine

----------------------- Page 19-----------------------

Livestock Sector Livestock accounted for about 50% of GDP of agricultural value added and about 9.4% of the GDP Net foreign exchange earnings from livestock products and by productsproducts accountsaccounts forfor 1111%% ofof thethe overalloverall exp ortexport earningsearnings ofof thethe country PPakikisttan iis probbablbly one off ththe worldlds lleastt effifficiientt user s off livestock resources since homebased slaughtering generall y does not make most efficient use of the byproducts 19 ----------------------- Page 20----------------------Milk and Dairy Pakistan is the 5thh largest producer of milk in the world, with 45 billions liter annual production (Ministry of Livestock and D airy Development, 20092010) Only 45% milk is being processed Value added dairy products commonly consumed in Pakistan: whole milk powder, skimmed milk powder, condensed milk, ice cream, bbutttter, ghhee Source: Economic Survey o f Pakistan ----------------------- Page 21----------------------Meat & Poultry Poultry sector is one of the organized and vibrant segments of agriculture industry of Pakistan This sector generates employment (direct/indirect) for about 11.55 MM peoplepeople Poultry meat contributes 23.8% of the total meat production in ththe counttry Meat sector is highly unorganized in Pakistan, though local and export potential exist ValueValue addedadded productsproducts:: Gelatin,Gelatin, sausagessausages etcet

c.. 21 ----------------------- Page 22----------------------Barriers to Value Addition in Pakistan Insufficient Raw Material Supply Dislocationofmanufacturingunits FluctuationFluctuationininrawrawmaterialmaterials upplysupply

InadequateInadequate SafetySafety StandardsStandards PoorPoor Financ ialFinancial SupportSupport Poorsafety/hygieneatworkplaceandfor Probleminextensionofc consumers commercialban ks OperationOperationofofoldoldmachinerymachinerywithoutwithout ReluctanceReluctance nlendinglendingrere preventivemeasures investments Adulteratedfoodproductsandinadequate packaging Poor Technical Choic es Lack of Erratic Inputs & Poor Artisan Skills f hi d Probleminpotablewatersupplies Poorliteracylevelandskillsofartisan 22 Innovation P h i Poorchoiceofmachineryand processes Nonexistentinnovation ----------------------- Page 23----------------------Major Challenges as a Nation Populationgrowth

Ageingpopulation Urbanization Foodforhealth FFooddffordiffdifferenttagegroups Foodforpleasureandconvenience Healthdisorders:CVD,Obesity,hypertension,diabetes

FoodFoodSafetySafety ----------------------- Page 24----------------------Challenges in Agro-Processing

 Postharvest losses due to lack infrastructure Food grains : 1518% Fruits and vegetables: 2040%. Inability to manage raw material supply Inaddequate coldld chhaiin ffaciliilitiies Poor financial support Lack of investment in the supply chain

of storage

and

transport

Lack of training facilities for farmers and processors 24 ----------------------- Page 25----------------------Challenges in Agro-Processing . High excise duty on packaging Varying standards for food products PoorPoor oror nonnonexistentexistent standardsstandards ofof safetysafety inin thet he workplaceworkplace andand for the consumer Poor qualility off thhe prodducts Weak reggulatory system Poor technical choices and a lack of innovation 25 ----------------------- Page 26----------------------Challenges in Agro-Processing Frequent failure pprocessingg belts or interruption of power production/

Unequipped food analysis laboratories Inefficient market structure Lackk off addequate traiinedd manpower Lack of coordination research organizations links with academia, industry and 26 ----------------------- Page 27----------------------Opportunities of Food Processing in Pakistan Halal meat products

Seed / grain drying, aeration and storage technology

AApplilicatition off exttrusiion ttechhnollogy iin cerealls Rice drying technology for obtaining higher head rice yield Efficient pulse processing technology Rice parboiling technology

PrePrecoolingcooling technologytechnology forfor fruitsfruits andand vegetable svegetables 27 ----------------------- Page 28----------------------Opportunities of Food Processing in Pakistan Fruits and technologygy vegetables canning, grading, and packing

Cold stores for potatoes, citrus, apples and other foods Modified atmosphere technology for fruits and vegetables Apriicot andd ddates ddryiing andd processiing techhnollogy Smallscale growing areas fruit jjuice technologgy for the remote fruit

ValueValue additionaddition inin milkmilk ee.gg. milkmilk powderpowder, cheese cheese, yoghurtyoghurt andand icecream 28 ----------------------- Page 29----------------------Suggestions Establish agroprocessing training institutes Bulk handling and storage technology at farm levels CreditCredit byby banksbanks andand financialfinancial institutionsinstitutions Setup of "Food Parks and Technology Transfer Centers Develop cottage industry on priority basis Establish small food processing units at district level Encouragge direct marketingg of pproducts byy the farmers 29

 Revise Pakistani food standards for quality of food products ----------------------- Page 30----------------------Suggestions Use of local material in packaging Improving process efficiency and decreasing losses VVallue addddedd prodductts rathther ththan ffreshh prodduce Promote export of indigenous products for ethnic groups Linkages between industry and research organizations Focus on brand building CreatingCreating awarenessawareness amongamong consumersconsumers 3 0 ----------------------- Page 31-----------------------