June 3, 2014

1. June 3, 2014 Developing Integrated Supply Chains Sanjeev Asthana “ Better Returns for the Indian Farmer and producer by connecting them directly to the Indian and global consumer, and lower prices and better product quality for consumer

2. Agenda Introduction • Reliance – Growth is Life Retailing in India • Integrated Supply Chain: ‘Farm to Fork” • Challenges • Market Driven Supply Chains Most Efficient

3. “The fundamental belief for us is that growth is life and we have to continue to grow at all times” - Mukesh D Ambani Chairman & Managing Director

4. Revenues US$ 19.9 billion Cash Profit US$ 2.9 billion Net Profit US$ 2 billion Total Assets of US$ 20.8 billion India and Reliance Revenues equivalent to 2.8% of India’s GDP Over 8.2% of India’s total exports amounting to US$ 7.32 billion Contributing 8% India’s indirect taxes 4.7% of the total market capitalization 11.5% weightage in Bombay Stock Exchange Sensex 9.3% weightage in National Stock Exchange Sensex Reliance – Contribution to Indian Economy

5. Retailing in India With robust economy, sustained GDP growth and booming stock exchange, there are several emerging sectors in India waiting to be tapped . . . Organized Retail Is At The Forefront Of These Opportunities

6. Retailing Segments

7. Source: National Center for Agriculture Economics and Policy Research Growth Rate Agriculture • 1% change in GDP of agriculture generates 0.24% overall GDP growth • Linkage effect: effect on industry: Elasticity of industrial output growth wrt growth rate of agriculture is 0.38. • Agriculture contributes 24.2% to GDP, 15.2% of total exports and provides employment to 58.4% of country’s work force

8. GAPS - Key areas Retailing/ Wholesaling / Export Handling & Logistics Farming Processing • What to produce? • How to create scale operations? • How to control and buy effectively? • Development & Absorption of technology • How to build scale? • How to develop forward linkages? • How to establish the food safety? • Can the private label market be tapped? • What are the infrastructure & technology requirements • Where to set up this infrastructure • What logistics constraints have to be overcome? • How to build world scale processing facilities? • How much of backward integration is necessary?

9. Low Opportunity Low Productivity Lack of Awareness Poor Rural Economy Lack of Awareness and Low Opportunity • Access to capital • Access to market • Access to technology • Quality • Efficiency • Cost effectiveness • Market Intelligence

10. Status 5- 7 intermediaries. Price spread: Wastage – 20-30% Cost of supply chain 10% Margin for inter 40% Farmer realisation 20-30% No grading, standardisation Negligible food processing Limited exports Integrated Supply Chains Reduce wastages Preserve freshness Reduce consumer prices Improve farmer price Improve farmer income Improve exports Traditional Supply Chain

11. Wastages and Costs Current Current Scenario Farmer 15% Consolidator 5% Wholesaler 5% Semi-wholesaler 5% Source: IIM Bangalore Research * Wastages in red Retailer 8%

12. How to make this Supply Chain Efficient Strengthen Value Adding Activities e.g. Primary Procurement Infrastructure, Cold Chain, Demand Driven Supply Chains, Food Processing, Exports of Excess Produce, Food Safety Elimination of Non Value Adding Activities e.g. Intermediaries Focus on strengthening value adding activities will lead to sustainable advantages, and benefits across the value chain

13. Agri Infrastructure - The Missing Link Logistics Warehousing & Storage Primary Processing Community Facilities Technology Development Retailing Food Processing & Export

14. Status of Indian Farms Productivity can improve 3-4 times from current levels Needs technology and quality inputs No one-stop shop Need to complement the government extension machinery Market Need Trained agronomists – visit farmer fields and provide advise – monitor progress One stop shop for all agri inputs and finance Enables right choice of crop and technology in line with the ecology and market demand. Improving Farm Productivity and Farm Incomes

15. Farm to Fork: Impact on Prices original price level Consumer price anticipated price level Farmer Price Markup Increase farmers’ realization and lower consumer prices

16. Waves of Change: Inclusive Growth Rural Development3.0 Rural Development 2.0 Employment Generation Rural Development 1.0 Global Linkages • • Promoting GAP:EurepGAP • Domestic Distribution • Export • Value Addition • High Return to Farmers Agriculture Services Availability of Quality Inputs and Daily Need Items • • For High Value Crops • Organic Farming • Expert Advice • Extension Services • Vet. Services • • At Right Place • At Right Time • In Adequate Quantity • At Reasonable Price • Financial Support

17. Inclusive Growth for All • Increased revenues will come by the reduced wastages • Farmer will gain with efficiency in supply chain • Customer will pay less for the quality produce • Information flow will lead to demand driven production • Infrastructure development leading to growth of sector • Food Processing and value addition will open new vistas • Safe to Eat Food Products • Exports will boost the price realizations of the produce

18. Globally Integrated Supply Chains- Case of Cotton

19. Making cotton ‘fashionable’ again ... • Post access (today, 2005) • Farmers shift back to cotton • Acreages increase. Yields increase. Production increase phenomenally • Quantitative restrictions on textile exports abolished • Indian textile industry extremely buoyant • Textile machinery manufacturers see a 50% increase in sale. Their order books filled up for two years !

20. Cotton production and textile exports Liberalisation WTO signing Enhanced access Quota dismantled

21. Cotton production and textile exports Liberalisation WTO signing Enhanced access Quota dismantled

22. Cotton production and textile exports Liberalisation WTO signing Enhanced access Quota dismantled

23. THANK YOU