The irony about almonds is that despite the product being native to South Asia (and the Middle East), while US accounts for a majority of its production, India is, by far, its biggest importer. Reason? Perfect soil and weather conditions in California, and Indian mothers propagating the health benefits of four almonds a day for generations. What’s absolutely not ironical, though, is the margins it ‘normally’ offers to importers.
Vanita Peter D’souza | August 2015 Issue | The Dollar Business
Old Delhi has its own charm. It has been invaded, plundered and broken down, and then rebuilt several times. Its look and feel are very different from the modern New Delhi. Each of its lanes and by-lanes have a story to tell. One such neighbourhood is Khari Baoli (chances are, you wouldn’t have heard about it), which is a 400-year-old market near Fatehpuri Masjid in Chandni Chowk. When you walk down its by-lanes, all you will see is dry fruits and spices, giving the neighbourhood an aroma of its own. Name any dry fruit or spice, and you will spot it at Khari Baoli. Wondering why The Dollar Business is talking about a nondescript Old Delhi neighbourhood? Well, the answer is India’s surging almond imports.[sociallocker id="9714"]
Gift from California
To understand the growing demand for almond in India, which has made the country its biggest importer, The Dollar Business caught up with Ankit Gupta, who works for an export-import firm named Shiv Lal Ramesh Chand & Sons as Sales Manager, at the Khari Baoli market. Gupta says, “Demand for almond is increasing day by day. There is no end to it.” These are not just Gupta’s thoughts. Figures validate them – India’s in-shell almond imports have grown at a CAGR of 17.5% over the last decade. What’s even more interesting is the fact that Sudarshan Mazumdar, Regional Director, Almond Board of California, thinks that in the future, the growth rate will be even higher. “I tell importers that the game has just begun,” he tells The Dollar Business. But what do Indians do with all these almonds? Shrey Bhatia, Proprietor, UDB Nuts, has the answer. “We will eat and gift almonds come what may. For Diwali, we will gift almonds with other nuts. In case, we gift any other gift, we will accompany that with almonds,” Bhatia tells The Dollar Business, with a tone of sarcasm. Now that you know all the almond you received in fancy dry fruit boxes last Diwali were most likely imported, let’s also tell you that, very likely, they were imported from the US. For, not only is the US by far the biggest producer, but also the top exporter of almonds in the world. “Most traders in this market import almonds from California,” Gupta validates. But why California? “The main reason is soil and weather conditions. You need a mild temperate kind of weather, cool rainy winters and dry summers, accompanied by rich soil for almond production. All of this is available in the central valley of California. Secondly, research has helped us consistently increase yields,” answers Mazumdar.
Aussie spirit
After US, Australia is a distant second when it comes to India’s sources of almond imports. But being cheaper (in FY2015, Australia’s per MT in-shell almond exports to India was 8.8% cheaper than that of the US), the overall value being shipped to India has surged at an average of over 84.3% in FY2013 and FY2014, before a slight dip in FY2015. “Exports of Australian almonds to India have surged in the past few years as a result of the large area of orchards planted in the mid-2000s coming into full production, thereby increasing the Australian industry’s capacity to export,” Ross Skinner, CEO, Almond Board of Australia, reveals the reason behind this trend to The Dollar Business.
For jobs
While India is the world’s biggest in-shell almond importer, it doesn’t even rank in the top 15, when it comes to imports of shelled almonds. And the reasons for this are simple. Firstly, given the cheaper labour cost in India as compared to that in both the US and Australia, it’s very logical to import in-shell almonds and then shell them in India. Secondly, probably in order to ensure almond-shelling related jobs, even the government has fixed lower import duties for in-shell almonds as compared to shelled almonds – Rs.35 per kg for the former, as against Rs.65 per kg for the latter. And one of the best examples of such differential rates indeed creating jobs in India is Karawal Nagar in North East Delhi, where, on an average day, one can find thousands of workers shelling almonds. Interestingly, even exporters are not perturbed by such differential rates. “This (differential rates) is very good for India because the shelling that happens here has created a huge cottage industry, ” Mazumdar says, much to our surprise.
To taper paper
Almond imports might sound like a superb business, but it has its fair share of challenges. Firstly, to import almonds, one needs a number of documents, like health and sanitary certificates, certificate from food health authorities and phytosanitary certificate, etc. Traders also feel that rules that make having an import licence mandatory should be done away with. “One needs to have an import permit to import almonds. But in case of Californian pistachios, the government has revoked the rule that necessitated a permit. This should be done even for almonds,” Bhatia tells The Dollar Business.
Usual suspect
What are the basic ingredients of a Bollywood blockbuster? A hero, a heroine and a villain, isn’t it? So, let’s call almond the hero and India the heroine. Guess who the villain is? The Food Safety and Standard Authority of India (FSSAI). With already a bad reputation in the case of several imported food items, the agency hasn’t made its case any stronger when it comes to almond. “There are problems with FSSAI. It takes a lot of time to clear our containers at the port. Sometimes, it takes 15-20 days, and sometimes even a month,” says Gupta. Delaying clearances is not the only issue FSSAI is blamed for. It’s also accused of pilferage! “During FSSAI sampling, there is pilferage,” alleges Bhatia.
Seasonal hiccup
If you plan to import almond imagining FSSAI-related hindrance to be temporary, here’s another piece of bad news. Preempting a rise in prices because of the drought in California, Indian importers had imported huge quantities of the dry fruit in the recent past, which has created an over-supply situation and wiped away margins. Yes, almond imports are ‘currently’ not very profitable. Several channel checks by The Dollar Business has confirmed this. So, what’s the takeaway? Simple. Just wait for the over-supply situation to take care of itself. Given the margins almond imports normally offer, the wait is definitely worth it.
“I tell importers that the game (India’s almond imports) has just begun” - Sudarshan Mazumdar, Regional Director – India, Almond Board of California
TDB: Give us a brief overview of Almond Board of California and its operations.
Sudarshan Mazumdar (SM): We were set up in 1950. We are a non-profit organisation, representing the interest of almond growers and handlers. We do not participate in any commercial transaction. We don’t buy or sell almond. We don’t set their prices. California accounts for around 83% of the global almond production.
We support the industry in various ways. We do a lot of nutrition research, with third parties like universities, scientists, researchers and hospitals, to understand the benefits of almond for the human body. We also do industry research to figure out ways to increase the yield and minimise the utilisation of pesticides and water.
For handlers, we gather all possible data, like how much is shipped out to different destinations every month, since we export around 70% of our crop to over 90 countries. This helps them to know what exactly is happening. We also do global marketing, wherein we build demand for almonds all over the world. We also work with government authorities in different countries for better market access.
TDB: What has made US, by far, the world’s biggest exporter of almond?
SM: The main reason is soil and weather conditions in California. You need a mild temperate kind of weather, cool rainy winters and dry summers, accompanied by rich soil for almond production. All of this is available in the central valley of California. Secondly, research has helped us consistently increase yields. Even growers are very confident of domestic and international demand for almond, hence they have also been increasing the hectares under cultivation.
TDB: How much of US’ total almond exports are accounted for by the California region?
SM: It might sound funny, but in US, California is, actually, the only state which grows almond! So, 100% of the US’ almond exports are from California. In fact, California’s No.1 agricultural export is almond.
TDB: Is almond a rich man’s nut? Tell us of its unknown uses, if any.
SM: I will not call it a rich man’s nut. If you look at last year’s calendar, India’s imports were worth over $250 million. There is a huge consumption base of almond. Also, if you look at prices, it is cheaper than most other nuts, except peanut. Almond has significant health benefits. It is good for the heart, weight management and diabetes management. And these issues are big in India.
Almond milk is gaining popularity. It is not available here in India, but it is replacing dairy milk in many countries. Similarly, very few people know that almond husk is used as an animal feed. It replaces hay and the almond skin is used for animal bedding. Though we look mostly at the kernel, there are actually three products that are procured from one crop.
TDB: What factors are behind India’s rising imports of almond?
SM: The per capita consumption of almond in India is still very low. We had done some study, with the help of Deloitte, in 2010. Basically, Deloitte looked at different markets and at different opportunities. That’s when Deloitte found out that the per capita consumption of almond in India is 0.09 lb, as compared to 1.48 lbs in US. This shows that there is huge headroom for growth, since the Indian economy is growing and people have more money to spend. The spending on almond is rising along with the rising of health consciousness in the country. In fact, I tell importers that the game has just begun!
TDB: Why does India import a lot more of almond in-shell, instead of shelled almond?
SM: This is because of the difference in the import duty between the two. While import duty on almond kernel in Rs.65 per kg, it is Rs.35 per kg for almond in-shell. This is, actually, very good for India because the shelling that happens here has created a huge cottage industry, which provides employment to many.
TDB: Which regions in India have the highest demand for almond?
SM: As per our understanding, North and West India have very strong demand for almond. Though the South is considered to be a strong cashew market, but even there, we are seeing a shift in trend and almond consumption is increasing. While the east is not very strong, I have heard that even there, demand has started picking up.
TDB: What challenges, if any, do you face while dealing with almond buyers in India?
SM: There are hardly any challenges. Challenges are faced by new importers, since they have to meet government regulations. I don’t really see much of a challenge. This is because unlike many other countries, India has a strong almond tradition. Here, I don’t have to tell people that almond is good for them. They know it is good.
TDB: In India, almond is one of the very few commodities that have a flat rate (Rs./kg) of import duty. What do you think is the reason for this?
SM: It has been there and there is no answer for it. But importers have benefited from the flat rate of import duty, since it helps them predict how much they have to shell out, which makes for easier business decision making.
TDB: Australia’s almond exports to India have seen a surge in the last couple of years. Do you fear increased competition in the future?
SM: In terms of share, Australia has definitely grown. But then, even the market has grown. One of the reasons for this is that Australia grows varieties very similar to us. Secondly, Australia has been increasing its area under cultivation. From our perspective, it doesn’t really matter. We are not looking at a market share fight here. We are looking at growth. Moreover, if we look at the seasonality aspect, when we have our harvest, they have their bloom and vice versa. So, when their crop is ready to be shipped out, our inventory is closed.
“Our focus is on ensuring consistency in quality” - Ross Skinner, Chief Executive Officer, Almond Board of Australia
TDB: What’s the reason for Australia’s almond exports to India surging in the last couple of years?
Ross Skinner (RS): Exports of Australian almonds to India have surged in the past few years as a result of the large area of orchards planted in the mid-2000s coming into full production, thereby increasing the Australian industry’s capacity to export.
India is Australia’s largest single country market, with exports in 2014 being 21,000 MT. India is also the world’s largest importer of in-shell almonds and its demand has expanded at an average of 14% per year over the last decade. Australia supplied 21% of India’s imports in 2014, with United States firmly being the largest supplier with 75,000 MT. I would also like to add that supply from Australia has increased at an average of 31% per year since 2005.
TDB: Do you have a strategy in place to export more almonds to India and topple US from the No.1 exporter spot?
RS: India is an important market for the Australian almond industry and the timing of our harvest suits the supply to a certain segment of the Indian market. India is such a large and growing market that California will remain the major supplier, with Australia being an important but lesser source of almonds. Our strategy for the Indian market is focussed on ensuring consistency in meeting quality requirements and considerable investment in research is being made in this area.
TDB: Which regions in India have the highest demand for almonds?
RS: Central and northern regions of the country have a very high demand for almonds.
TDB: In India, almonds are one of the very few commodities that have a flat rate (Rs./kg) of import duty. What do you think is the reason for this?
RS: The Indian and Australian governments are currently negotiating a free trade agreement, which, hopefully, will remove the tariff on in-shell almonds over the next few years. However, the Australian industry supports the retention of a tariff on kernel, recognising the employment generated in shelling almonds in India.
TDB: What are the main challenges in exporting almonds to India?
RS: A vast majority of Australian almonds are traded through Delhi, although the nut trade in Mumbai has grown in recent years. One of the main challenges is to ensure earliest possible shipment of the new season’s crop as the arrival of Australian almonds usually lifts the market. A major area of concern that has emerged is poorer quality of almonds in the odd year, when wet harvesting conditions are experienced.
TDB: Do you have tie-ups with Indian companies to market almonds? What are your future expectations from the Indian market?
RS: The Australian industry has developed strong relationships with Indian trade over the past decade. Nut trade in India and Australia is well organised and this has facilitated the growth of business between the two countries. With the rapid increase in our exports to all parts of the world, we have found that most countries like doing business with Australian suppliers.
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