It’s an integral part of the processed food industry and while you might be consuming it on a daily basis, odds are that you would have never heard about Pectin. While very little domestic production have seen India’s pectin imports rising, lack of awareness ensures that it offers lucrative margins to an importer

Jayashankar Menon | @TheDollarBiz

What is that unique ingredient that helps jams & jellies, marshmallows, marmalades and a host of other delicacies gel? Which is that product that is most sought after by FMCG majors like Hindustan Unilever, Nestle, GlaxoSmithKline, Kellogg’s and innumerable food processing companies? And which is that product that perhaps  has no substitute? Chances are that you wouldn’t have heard about it.

Well, if you are still wondering, let’s make your task easier. This magical ingredient is called Pectin. It’s a natural compound extracted from different sources of vegetative origin. It is produced from lime, orange peels and apple. While the level of pectin in an apple is only 1-1.5%, in citrus peel it’s around 30%. The key raw materials for pectin production are dried citrus peels and apple pomace, both by-products of juice production. Pectin is a gelling and thickening agent and is also a stabiliser in food. Pectin gives the jelly-like consistency to jams and marmalades, which would otherwise be just sweet juices. Pectin is also being increasingly used to stabilise acidic protein drinks including drinking yogurt, besides being a fat substitute in baked food products.

According to Switzerland based International Pectin Producers Association (IPPA), pectin is one of the most versatile stabilisers available. It’s gelling, thickening and stabilising attributes make it an essential additive in the production of many food products. Traditionally, pectin was primarily used in the production of jams and fruit jellies – industrially as well as at home – and in products with high sugar content. Reason: Pectin secures the desired texture, limits the creation of water/juice on top of the surface, and ensures an even distribution of fruit in the product.

With changes in lifestyles, pectin is now being primarily sold for industrial use. In some European markets, it is still sold to consumers as an integrated component in gelling sugar. Pectin is generally regarded as an extremely safe food additive and its composition and use is regulated under various food additive laws. It is also recognised under the International Codex Alimentarius, recognised by FAO and WHO. The United States Food and Drug Administration (USFDA) too recognises pectin as a GRAS (Generally Recognised as Safe) for the use in all non-standardised foods.

As far as the business viability of the product is concerned, the IPPA is of the view that at present, good quality organically produced pectin raw materials are not available in large quantities and the situation is not likely to change within the next five years. Good news for those who want to enter the business with serious long-term commitment.

The protagonists

Germany with exports valued at $186.70 million, Mexico with $69.13 million, Brazil with $46.70 million, Czech Republic with $42.60 million and China with $27.40 million were the top exporters of pectin during CY2013. On the other hand, USA with imports valued at $89.60 million, Germany with $74.80 million, Japan with $45.1 million, France with $29.10 million and Russia with $27.20 million were the major importers of pectin during FY2013. According to information contained in Chemical & Engineering News, a magazine published by the American Chemical Society, around $850 million worth of pectin is sold annually across the world.

Import of pectin to India is on the rise for the last few years. According to the Ministry of Commerce (GoI), India’s pectin imports almost doubled from $4.84 million in FY2012 to $8.15 million in FY2013. This trend continued in FY2014 with imports valued at $10.14 million. Multinational players such as Hindustan Unilever, Nestle, GlaxoSmithKline, Kellogg’s and many others import pectin from various global markets. All major food product makers and diary product producers also use imported pectin.

When it comes to Indian food product manufacturers they rely on China and Brazil as these countries offer pectin at around $10 per kilogram, whereas pectin produced by Germany, the Czech Republic, and Denmark are a tad expensive. Prices of pectin vary a lot, as the bulk of imports go through intermediaries, who usually offer pectin in the range of $6-$13/kg. Depending on the type and brand, inferior varieties of pectin are available even at $0.5- $2/kg.

And more

The total duty on pectin imports in India work out to 20.068%, which includes 15% effective customs duty, 4% additional customs duty (ACD) and a 0.45% cess. But the 4% ACD is refundable only to food processors and other end users who use imported pectin for value addition to their products, instead of selling it out in its original state.

When it comes to India, pectin extracted from apple and citrus fruits are in great demand. While high density pectin is used by the confectionery industry, medium and low density pectin is in great demand for the production of yogurt and fruit juice. Despite abundance of raw materials, domestic production of pectin in India is still too low to meet the burgeoning demand. And that’s the reason why most food processors in India either import pectin directly or buy it from importers.

Profit estimate for pectin imports Reduction in customs duty for pectin to 15% in 2012 has expanded margins

Since pectin is an indigestible soluble fiber therefore its content in most processed foods is restricted between 0.5% and 1.0%. In medicine, pectin increases viscosity and volume of stool. It is used against both constipation and diarrhoea, besides being used in throat lozenges as a demulcent. Apart from that pectin is used in cosmetic products, where it acts as a stabiliser. It is also used in wound healing preparations and specialty medicine adhesives like colostomy devices. 

All the same

Mapro Foods, the Mahabaleshwar-based manufacturer of jams and other food products, is a major importer of citrus pectin. Speaking to The Dollar Business, Mayur Vora, Managing Director of Mapro Foods, says, “India’s imports during FY2014 was around 1,000-1,200 tonnes valued at $10.14 million. About 70-80% of the imported pectin is consumed by the food industry.”

When enquired about the qualitative difference between Brazilian and Chinese pectin, Vora said there is hardly any difference. And he is right. Price wise, China used to be much more competitive. But with the renminbi appreciating and the real depreciating over the last two years, there’s hardly any difference in prices for an importer. “It’s all the same. However, shipping time from China is much less. While we import citrus pectin from Brazil, we source apple pectin from China. In fact, our company accounts for about 15-20% of India’s total pectin imports,” he tells the magazine.

Despite the presence of domestic suppliers, major manufacturers like Mapro seem to entirely rely on imports. Asked about the reason for this reliance on imports, Vora explained that the total domestic supply is just about 5-10% of the total demand. “So, if we want large quantities, there are no suppliers in the domestic market. The only alternative is to import from China and Brazil,” he adds.

Good to last

Despite abundant resources, India doesn’t produce sufficient pectin to cater to the domestic demand. World over, industrial waste of both apple and citrus processing industries is used as an input for pectin. However, India doesn’t have large apple or citrus processing industries. Most of the citrus fruit consumption in India happen at homes. Collecting the waste can often turn out to be costlier than the product itself. This obviously means great news for importers. At current prices, profit margins of over 25% are there for the taking for those importing top quality pectin from Brazil. With demand expected to move only northwards, margins are bound  to expand. Sounds lucrative, doesn’t it?