Category — Agriculture

When I immigrated to the United States, one of the snack foods I began to enjoy was microwave popcorn. My American born kids grew up with it during their elementary school years. But we missed it on trips back to India. Some time ago, we began finding ACT II popcorn on the shelves in major Indian cities. This is a product of Nebraska-based giant ConAgra Foods, Inc. and they entered the Indian food market  via a minority investment in India’s Agro Tech Foods Ltd (ATFL).

A few weeks ago, ConAgra   became the majority owner of ATFL) increasing its ownership of shares to more than 50 percent, through the $10 million purchase of existing shares from a third party.

“ConAgra Foods has enjoyed a strong partnership with Agro Tech Foods, dating back to 1997, and we believe strongly in its business model and leadership team,” said Gary Rodkin, CEO, ConAgra Foods. “Expanding our International business is a key part of our strategic plan, and India represents an attractive growth market for ConAgra Foods. We will continue to work with Agro Tech’s management team to expand its business and our investment in this important region.”

Agro Tech Foods is a public  company that markets food and food ingredients to consumers and institutional customers in India. The company’s products include Sundrop branded edible oils, shelf stable pudding and peanut butter, Crystal branded sunflower oil, Healthy World branded dried green peas, and, based on a license from ConAgra Foods, ACT II branded popcorn.

What this means

Sicne Agro Tech Foods has enjoyed consistent EPS growth for the last five years,  from 6.60 rupees/share in 2007 to 13.04 rupees/share in 2011 and since the company reported an 11 percent increase in net sales, and a 26 percent increase in profit after tax, it was not a bargain buy for ConAgra. But I think it is a sensible purchase given the projected growth in consumer packaged food sales in India over the next decade.  The middle class population and the spending per capita are rising to create a virtuous spiral that your company should probably also consider!.

In 2010 American exports to Asia exceeded shipments to the Europe for the first time ever. Yesterday, I met U.S. Commerce Secretary Gary Locke who was in Los Angeles to promote President Obama’s  National Export Initiative (NEI), which seeks to double American exports to $2 trillion by 2014.

Speaking at the Asia Pacific Business Outlook conference, Locke said exports now supported 10 million jobs in America, including 700,000 in California. One in three manufacturing jobs and one in five agricultural jobs in the United States were tied directly to exports. In addition, exports were a key driver of economic recovery in the past two years, accounting for nearly half U.S. economic growth since 2009, according to Locke.

Commerce Secretary Gary Locke and me

In my work at Amritt, my colleagues and I are vigorous supporters of the NEI. In fact the topic of my talk at the same conference was how to increase exports to India five-fold not just two-fold; we believe that this is quite doable.

Secretary Locke, the first Chinese American to hold a cabinet post, is expected to become the next U.S. Ambassador to China  by June of this year.

Takeaway: Asia and India in particular is hugely important to America’s economic engine going forward.

Cummins Inc.’s (CMI) fourth-quarter profit climbed a better-than-expected 34% as strong sales in India and other BRIC countries offset weaker demand in the engine-maker’s North American market.  The maker of truck engines and power generation systems continues to expect growth, with plans to add about 2,500 U.S. jobs this year after adding only 185 in 2010.

The company’s profit was led by 48% increase in international sales that accounted for 64% of total sales. Sales in India shot up 37% during the year.

Returning Chinese expats, called sea turtles, have helped in the transformation of that Shanghai, Beijing, Shen-zhen and much of the country. We are now seeing evidence of similar threads with returning Indians.

New York educated engineer Gyanesh Pandey, returned to India after spending years with International Rectifier, a company that makes power chips. He and three friends with similar backgrounds, founded Husk Power Systems a company that has installed  65 small power units that serve a total of 30,000 rural households in the eastern state of Bihar. The company, partly funded by Silicon-Valley venture capitalist Draper Fisher Jurvetson, is currently installing new systems at the rate of two to three each week.

The technology developed by Pandey uses the waste husk from locally grown rice as the fuel. Rice Husk, an amorphous and low density fuel produces a gas with high tar content and was historically used in dual fuel systems where diesel was the primary input. Much of rural India is off the power grid; lighting and power to charge cell phones is provided by diesel generators.

Applying the idea of appropriate innovation to India, where labor is cheap, Pandey hypothesized that while dirty gas can clog the engine, if the engine is cleaned before the clog begins to hamper its operation seriously, you can build a sustainable product. They got their gasifier fabricated at a local workshop, procured a local CNG (compressed natural gas) engine from a small supplier and modified it to make their prototype.

According to an item this week on the New York Times website, “The company expects to have 200 systems by the end of 2011, each serving a village or a small village cluster. Its plan is to ramp that up significantly, with the goal of having 2,014 units serving millions of clients by the end of 2014.”

The India Expert does not know if Husk Power will transform rural India. But there are a thousand such innovators hard at work across India today and some of their innovations will transform not only India but parts of the developed world as well. Expect some impact in five years and significant impact by 2020.  You read it here first!

DuPont Co., the third-biggest U.S. chemical maker, said it expects annual revenue from India to increase more than 40 percent to about $1 billion by 2012, aided by agriculture, infrastructure and automotive products.

Spending on a local research laboratory will be boosted by 500 million rupees and the expansion will be completed by the middle of next year, Chief Executive Officer Ellen Kullman said in an interview in New Delhi, while attending the World Economic Forum summit in November.

Farmers in India, the world’s second-biggest grower of rice, produced an average 3.3 metric tons of paddy per hectare (2.5 acres) in 2007, compared with 6.4 tons in China, 10.3 tons in Egypt and 8.1 tons in the U.S. Du Pont believes it can help boost productivity in India, in what President Obama referred to as the “evergreen revolution” (a reference to the follow on of the green revolution created by American scientist Norman Borlaug).