A GLOBAL / COUNTRY STUDY AND REPORT ON EXPORT OPPORTUNITY OF FOOD INDUSTRY IN MALDIVE Submitted to Gujarat Technological University

IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ASMINISTRATION

UNDER THE GUIDANCE OF PRATIMA SHUKLA (ASSISTANCE PROFESSOR)

SUBMITTED BY:SHAILESH PATEL (107460592072) MAYURI CHAUHAN (107460592054) KOMAL JAIN (107460592017) NITISH KARIYA (107460592004) VIPLAV PARMAR (107460592088) POOJA VYAS (107460592005)

[Batch: 2010-12, MBA SEMESTER III/IV] R.B. INSTITUTE OF MANAGEMENT STUDIES

MBA PROGRAMME Affiliated to Gujarat Technological University , Ahmedabad April, 2012

Declaration
We, Shailesh, Mayuri, Komal, Nitish, Viplav & Pooja, hereby declare that the report for Global/ Country Study Report entitled EXPORT OPPORTUNITY OF FOOD INDUSTRY IN MALDIVE is a result of our own work and our indebtedness to other work publications, references, if any, have been duly acknowledged. Place : Ahmedabad Date : 30/4/2012 (Shailesh Patel) (Mayuri Chauhan) (Komal Jain) (Nitish Kariya) (Viplav Parmar) (Pooja Vyas)

Institutes Certificate
Certified that this Global /Country Study and Report Titled EXPORT OPPORTUNITY OF FOOD INDUSTRY IN MALDIVE is the bonafide work of Mr. SHAILESH PATEL (107460592072), Ms. mayuri chauhan (107460592054), Ms. komal jain (107460592017), Mr.. nitish kariya(107460592004), Mr.viplav parmar(107460592088), Ms. poojavyas(107460592005) who carried out the research under my supervision. I also certify further, that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate.

Pratima Shukla (Assistance Professor) (Certificate is to be countersigned by the Director/HoD)

PREFACE
Knowledge is power and ideas rule the world. Any human being when enters into the world enters with a raw brain and mind. He or She gains knowledge from the experience of his or her human ancestors, through the Bibles of the knowledge and also through his own experience. Theoretical knowledge is silver but practical knowledge is gold. The importance of the project preparation has been widely accepted in the educational institutions as well in business houses. The essence of the project preparation is to have an experience of all the hardship that is faced while setting up a new enterprise. Before presenting our project that would likely call a survey rather, we would like to say it is an image of our deep practical studies to whatever we have observed and analyzed. The purpose of writing a report is to put into work the practical training that is being imparted to us. Fundamentally the ground for preparation of the report is todays information, cultures that requires in depth knowledge of sectors, which gives a clear and reliable understanding of practical training that we get. This opportunity helped us to develop and enhance our appetite for learning and served as a fusion of the theoretical concepts and their practical applications in the corporate world.

ACKNOWLEDGEMENT
We owe debt to those who where so generous with their time and expertise and helped and guide in writing this project. The expertise in this project belongs to them. From inner most of our hearts the gratitude, which we has for our honorable guide Prof. Pratima Shukla This comprehensive project has been wonderful learning. We are very thankful to work on a project on Factors affecting purchasing decision of residential property. We would like to express our deep gratitude towards our mentor and project guide Pratima Shukla for providing us his inspiring guidance, valuable experience and knowledge at every stage of our work. He has been ever ready to solve our problem faced during the work by watching my deeds; guiding us and providing new horizons of conquer. We would like to express our gratitude to all the faculty members for providing facilities and their kind co-operation in my study and friends for helping directly and indirectly in the completion of the project. We also convey our sincere gratitude to our family members for their love and support. (Shailesh Patel) (Mayuri Chauhan) (Komal Jain) (Nitish Kariya) (Viplav Parmar) (Pooja Vyas)

CONTENT Particulars
PART II INDUSTRY/ SECTOR

COMPANY SPECIFIC STUDY Introduction to Food Industry Role in Maldives Structure & function of food industry Present position & trend of business with india Policy & Norms of food industry in Maldives Export Cycle Payment terms Document required for export Govt. requirement for support Potential trade barrier for Export of food in Maldives Opportunity for food industry in Maldives Conclusion & suggestion

INTRODUCTION TO FOOD INDUSTRY

There are many industries which can be work in any economy. Its depending upon the system & economical condition of the country. The resources available in the country also play a vital role in the development of the country. India is said to be the Golden sparrow. People of different country came in the country to make the business with the India. Specially Dutch, Portuguese, & Britishers came in the country to make the business with India. Specially they have focus on the some great items in the country like (mari masala & tejana). Now we have great time to make this as a opportunities for the country by exploiting it & develop the business relation with the other country. Food industry is a very important part of the economy of India. We have the different part of this food industry to exploit it as an opportunity. Food manufacturing Beverage manufacturing Food & beverage stores Food services & drinking places This industry is always comprised of many sub industries. The following is a sample of data for the sub industries. Breakfast cereal manufacturing Frozen food manufacturing Dairy products (except frozen) manufacturing Bread & bakery product manufacturing Soft drink & ice manufacturing Breweries Distilleries Supermarket & other grocery (except convenience) stores Full service restaurants Limited service eating place Drinking places(alcoholic beverage)

FOOD SECTOR & ITS ROLE IN THE MALDIVE

As we all know that the domestic food & beverage industry is a very mature & competitive industry with little growth at the domestic level. Increase in the market share of any industry in the economy come at the expense of the loss of market share of the other industry. In short most of the growth comes from the international expansion. The government of any country always put some rules & regulations for the exporting or importing any goods or services because of the fear of the decreasing share of the domestic country or the decreasing value of the domestic supply, which will ultimately lead toward the recessionary phase in the country. Now a days food industry plays a very important role in the country because of the increasing population in the country. On the contrary the government tries to manage the demand & supply of the food items. For example in India, we have ban on the export of rice because the government is not able to fulfill the domestic demand. But there is always loophole in the system like, we also have a ban on the exporting of the onion, but the onion powder can be exported in the other country. Even we have a Hugh market in the Bhavnagar. If we take other example, much domestic food and beverage companies want to take advantage of existing distribution systems, or underutilized plant capacity. Some acquisitions may be motivated by Federal income tax considerations. From the time that agriculture began about 7,000 years ago to the present there have been many important developments that are responsible for the state of the industry as it is today. The following events have had a major impact on where the industry is today.

The use of some form of irrigation is well documented

IRRIGATION INDUSTRIAL REVOLUTION FOOD PRESERVATIVES PACKAGING

throughout the history of civilization. It has enabled food production to occur in areas previously too hostile for plants and to counter the effects of drought.

Resulted in mass production of food products at lower cost and consistent characteristics.

Classified into two main groups, antioxidants that delay or prevent the deterioration of foods by oxidative materials and antimicrobial agents that inhibit the growth of spoilage and pathogenic microorganisms in food.

Tinned products came to America in 1822 and allowed food to be stored for long periods of time. Some packaging processes were developed to enable Napoleons armies to carry war to distant areas and remain well fed.

PASTEURIZATION

A partial sterilization accomplished by raising milk to a temperature high enough to destroy pathogenic bacteria. This process allows milk to remain consumable for about 14 days if refrigerated in closed containers.

TRANSPORTATION

First, railroads and barges, then trucks and air transportation have enabled many food products to be enjoyed in regions where food cannot be grown. Many locally grown food products can be consumed globally (bananas, fish, fruit, etc.).

PESTICIDES

Enabled farmers to significantly increase yield.

NUTRITION

In the 1950s and forward, nutrition became a major concern for production/consumption. The emphasis on eating healthy has spawned a new market segment; for example organic foods, low-fat foods and healthy foods all enjoy healthy margins and increased demand.

STRUCTURE, FUNCTION & BUSINESS ACTIVITY OF FOOD INDUSTRY

A. Restaurant Industry As a general rule full service restaurants are for the most part company owned with very little franchising. Fast food restaurants are heavily involved in franchising activities. Franchisees will pay a fixed per-cent of receipts to a franchiser for advertising and royalties. Some fast food franchisers will lease the structure to the franchisee for a monthly rate or a percentage of sales. Suppliers will help restaurant chains with marketing and advertising funds. It is not unusual for major suppliers to offer rebates or provide upfront payments to obtain exclusive supplier status. The internal controls of these chain restaurants are extensive; conversely individual independent restaurants do not always enjoy these controls over operations. Normally restaurants purchase from foodservice companies or they may purchase their inventory from a national chain commissary. Perishable goods are usually purchased from a local vendor. Four tip reporting programs are available for these taxpayers to enter into with the Service. Two of these pro forma documents are titled Tip Reporting Alternative Commitment (TRAC) and Tip Rate Determination Agreements (TRDA). The IRS developed the Employer Designed Tip Reporting Alternative Commitment (EmTRAC) Agreement program in response to employers in the food and beverage industry who expressed an interest in designing their own TRAC programs. Attributed Tip Income Program (ATIP) is a new three-year pilot program for food and beverage employers. The agreements serve a dual purpose: improving compliance of tipped employees and avoiding tip examinations. The TRAC agreement is by far the more popular with large and midsized taxpayers. B. Beverages Normally manufacturers of alcoholic and non-alcoholic beverages sell to distributors who own a franchise to sell in a given geographic area. There is extensive government oversight over the liquor industry and individual states and local jurisdictions usually have rules and regulations affecting the sale of these beverages within their jurisdictions. These beverage companies are very competitive and are focusing a lot of their activities in expanding internationally.

C. Food Manufacturers It is not uncommon for food manufacturers to spend more money advertising its products than making the product. Most of these companies have to pay a fee to get a retailer to provide shelf space for the manufacturers products (slotting payments). Some of the largest national advertising budgets are those of food and beverage companies. Manufacturers (vendors) provide various discounts and promotional funds to retailers, (volume, price, early payment, seasonal, rebates, cooperative advertising funds, market development funds, slotting, etc.) ECR (Efficient Consumer Response) is a concept that has been around since the late 1980s and is an initiative undertaken jointly by the manufacturers, distributors and retailers to improve distribution practices and clean up abuses in the industry. Trade allowance practices, including deductions are a major component of the process. The scanning features on cash registers provide data to all parties to make this process more efficient. The use of coupons is extensive; many manufacturers have set up web-sites that provide coupons on-line. These coupons are also available in the stores, magazines, newspapers and through the mail. Most manufacturers of food products have adopted just in time manufacturing processes.

PRESENT POSITION & TRENDS OF BUSINESS WITH INDIA DURING LAST 3 TO 5 YEARS.

In the beginning of the early 1980s, there is a trend of merger & acquisition activities have been started in the food & beverage industry. Many companies had taken the opportunities in India after the policy of the LPG to earn the business in the India. Several food and beverage manufacturers have spun off their restaurant businesses. Now days it becomes trend in the India that many food market leaders came in the India to have the business of the world second largest population of the country. For example, many international brands like Mc Donalds; Subway came in the country & had captured a large market share of the Indian food industry. It becomes tendency of the people of the India that they will start preferring the branded products especially in food items & every Sunday people has tendency to eat out of the home with either family or with the friends. So it has the wide opportunity for the business people to earn money out of it. Concept of franchisee:There is new concept of franchisee developed in all over the world. The new trend has been established since last decade. Most of the Business men focus on the different ideas of making more money. This is one of the ideas to capture this opportunity by providing the people qualitative food at the same time when they want with that quality which is served at that county. The franchisee owner always tries to maintain the same taste at all over the branches. The new trend which has been started in the country is to have the branches of the international or MNCs in the India. This new concept has achieved the glorious response from the people of India & the different companies have taken this opportunity seriously because the India has the second largest size of the population. So it is the most beneficial thing for the business to have a Hugh market. The companies have used the market penetration strategy to enter in to Indian market

POLICY & NORMS OF MALDIVE FOR FOOD INDUSTRY (INCLUDING LICENCING, PERMISSION & TAXATION ETC.,)
The Maldivian economy was entirely dependent on fisheries and other marine products for many centuries and fishery and related activities remain the main occupations of a significant proportion of people; the government provides priority to the development of the fisheries sector. At present, fisheries contribute over 15 percent of GDP and engage about 30 percent of the countrys work force. Outside of Male, fishing and subsistence agriculture (mainly horticulture) is the main source of food security and livelihoods for the vast majority of the people There is liberalized overall policy regime with the specific incentives for high priority of food processing. Norms permitted for 100 percent equity of Indian companies. For example currently we are exporting the poultry items especially to Maldives & Oman. Tourism & fishing are the main business or industries of the economy of Maldives. Apart from it tourism & hospitality is also an important part of the Maldives. So they have to make free economic condition & liberalized situation for the people of different country to come to the Maldives. Because it is only the area on which the development of the economy depends on. They need to develop the food industry if they want to develop the economy. & thats only why they had made the liberalized economic conditions for the food industry.

POLICY & NORMS OF INDIA FOR EXPORT IN MALDIVE INCLUDING LICENCE, PERMISSION & TAXATION
As far as our Indian situation is concern our economy is free economy. We like to have a business with the people of other country. So the procedure for the exporting is the same in most the products. There are some rules & regulation which will be for the exporting in the different company 1. 2. 3. 4. 5. FOREIGN TRADE ACT FEMA FERA CUSTOM ACT CENTRAL EXCIZE ACT

1. FOREIGN TRADE ACT: - this act will be covered under the ministry of commerce & governed by Director General Of Foreign Trade.(DGFT) Foreign trade policy was developed for 2009-2014 & it is covered under the chapter no 3 and 4. 2. FOREIGN EXCHANGE MANAGEMENT ACT: - The act will manage all the aspect related to the export & import. The rules & regulation will be decided under this act. 3. FOREIGN EXCHANGE REGULATION ACT: - It is covered under ministry of finance & department of revenue & RBI. It covers the financial part of the foreign exchange. It covers the regulation of the foreign exchange & flow of foreign exchange. 4. CUSTOM ACT: - Custom act was established in 1962. Under this act any goods exported from India are chargeable to duty. The items on which the duty is levied are given in the custom tariff act,1975 which is amended from time to time under the finance act. 5. CENTRAL EXCIZE ACT: - the excise duty needs to pay by a manufacturer. If a person or company wants to make an export & they are manufacturing something at that time they need to be registered under this act. There is one rule regarding this manufacturing that if person has the manufacturing less than a value of 1.5 crore at that time he need not to pay the duty. But when the amount goes beyond the 1.5 crore at that time one has to pay the excise duty

EXPORT CYCLE
IEC CODE (EXPORT IMPORT LICENCE) SELECT THE PRODUCT SELECT THE MARKET IDENTIFY THE BUYER GIVE THE QUOTATION SAMPLING
NEGOTIATIONS WITH THE BUYER

PERFORMA INVOICE/AGREEMENT/SALES CONTRACT

DECIDE PAYMENT TERMS

PRODUCTION / PURCHASE EXCIZE CLEARANCE[DIRECT/INDIRECT TAXES] LEGAL TRANSFORMATION CUSTOM CLEARANCE SHIPING LINE FORMALITIES

Payment terms:There are some terms & conditions for payment in making the business. Now a days it becomes more important for the business to give the good & services on the credit. There may be different payment schedule for the different parties. It can be like following.

Ex works
F.O.B. C&F C.I.F D.D.U. D.D.P.

The responsibility of the exporter is up to the factory. importer will take all the responsibilities. only the excize duty will be paid by the exporter.

FREE ON BORD The responsibility of the exporter is up to the port or the port of the exporter. The responsibility of the importer starting from the shiping line responsibilities. Cost & Freight The freight will be always port to port. The responsibility of the exporter is up to the port of destination.

COST INSURANCE & FREIGHT The exporter will take the responsibility of taking the insurance also. the responsibility of exporter is to export the goods to the port of destination with all the assurance. DELIVERY DUTY UNPAID In the DDU the exporter will take the responsibility to pay the bills of custom clearance on behalf of the importer.
DELIVERY DUTY PAID In the DDP the exporter has the maximum responsibility. to make goods available to the port of destination & to the importer. the importer has only the responsiblity to make the payment of the iport duty.

DOCUMENTS REQUIRED FOR MAKING EXPORT FROM INDIA.

DOCUMETS

PRE SHIPMENT DOCUMENTS

POST SHIPMENT DOCUMENTS

PRE SHIPMENT DOCUMENTS

INVOICE 6 COPIES

PACKING SLIP 6 COPIES

ARE - 1 DOCUMENT

CENTRAL EXCIZE INVOICE

EXPORTER'S VALUE DECLARATION

STATUTORY DECLARATION FORM(SDF)

B/L DRAFT

POST SHIPMENT DOCUMENTS

NEGOTIABLE DOCUMENTS

POST SHIPMENT DOCUMENTS

NON NEGOTIABLE DOCUMENTS

NEGOTIABLE DOCUMENTS
BILL OF EXCHANGE - 2 COPIES

INVOICE - 3 COPIES

BILL OF LOADING/ AIRWAY BILL 3 ORIGINAL

CERTIFICATE OF ORIGIN 3 COPIES

PACKING LIST 3 COPIES (FROM EXPORTER'S BANK TO IMPORTER'S BANK)

NON NEGOTIABLE DOCUMENTS

INVOICE 2 COPIES
BILL OF LOADING/AIR WAY BILL 1 ZEROX CERTIFICATE OF ORIGIN 1 ZEROX PACKING LIST 2 COPIES (FROM EXPORTER TO IMPORTER BANK) BANK COPY

BILL OF EXCHANGE 2 COPIES

INVOICE 2 COPIES

BILL OF LOADING/ AIRWAY BILL

CERTIFICATE OF ORIGIN 1 ZEROX

PACKING LIST 2 COPIES STATUTORY DECLARATION FORM 10 ORIGINAL EXCHANGE CONTROL COPY OF SHIPING BILL 10 ORIGINAL

GOVERNMENT REQUIREMENTS FOR SUPPORT

The government will always be there for giving support to you if we will fulfill all the procedures properly & make all the necessary documents which is mandatory in the contemplation of the different laws.

letter of credit
The letter of credit is a written document by the importers bank to the exporter which gives the guarantee on behalf of the importer that if importer is not able to pay the amount in any case the bank will make the payments.

Types of L/C

L/C AT SIGHT

L/C AT USAGE

L/C AT SIGHT
L/C AT SIGHT is used when the importer is willing to pay the sum at the time of the getting delivery. It is also called the immediate payment against document.

L/C AT USAGE
L/C AT USAGE is used when the exporter gives goods on credit to the importer. The maximum limits of giving the credit are 180 days. As per the government norms the payment will be received in maximum 180 days.

REVOCABLE L/C

IRREVOCABLE L/C

OTHER TYPES OF L/C

RESTRICTED L/C

CONFIRMED L/C

TRANSFERABLE L/C

BACK TO BACK L/C

REVOCABLE L/C
The revocable L/C is a document which can be changed by the importer without the approval of exporter. It can be canceled by the importer.

IRREVOCABLE L/C
The irrevocable L/C is a document which cannot be changed by the importer without the approval of exporter. For the small change in it required the negotiation & approval.

RESTRICTED L/C
The name itself suggests that the L/C restrict some of the terms & conditions. Which must be followed by the both the parties otherwise it can be canceled.

CONFIRMED L/C
This is the special type of L/C. which has the extra assurance. The advising bank will take the responsibility that if the importers bank will not pay the amount in that case the advising bank will make the payment.

TRANSFERABLE L/C
This is the L/C which can be transferred from one party to another as the payment will due from the one party & we need to pay to the other party. It is same as bill of exchange.

BACK TO BACK L/C

The bank will issue the two L/C s to help the exporter to get the goods, services or equipments from the sub contractor. With the original L/C from buyers bank in place the seller goes to his own bank & the bank will issue the second L/C in which the subcontaractor is the beneficiary.

PRESENT TRADE BARRIERS FOR EXPORT

Among the 1,900 islands in the Maldives, only 198 are inhabited. The population is scattered throughout the country, and the greatest concentration is on the capital island. Limitations on potable water and arable land, plus the added difficulty of congestion are some of the problems faced by households in Mal. International shipping to and from the Maldives is mainly operated by the private sector with only a small fraction of the tonnage carried on vessels operated by the national carrier, Maldives Shipping Management Ltd. Over the years, Maldives has received economic assistance from multilateral development organizations, including the United Nations Development Programme, Asian Development Bank, and the World Bank. Individual donors, including Japan, India, Australia, and European and Arab countries (such as Islamic Development Bank and the Kuwaiti Fund) also have contributed. In 1956, a bilateral agreement gave United Kingdom access to Gan in Addu Atoll in the far south, to establish an air facility in Gan in return for British aid. However, the agreement ended in 1976, shortly after the closing of the Gan air station.

POTENTIAL FOR EXPORT /IMPORT IN THE INDIA/GUJARAT FOR FOOD INDUSTRY

There is a lots of opportunity in the India & in the Gujarat to export the food products in the other country. If we study the culture of Gujarat the we become able to know that people are fond of eating & the girls are fond of making the new variety of food products & eating new varieties. There are lots of opportunities in the global market for the food products if we providing the good & qualitative products. There are different people having the different perception & they all have the different taste. So when the people have the different taste at that time we have to provide them the different taste as per the geographic & demographic variable. There are many brands in the world of the food products who has seriously taken the concept of franchisee. They had make available the same taste in the different country with the same quality & same price with the same services. So it is the very vital part of the food industry.

BUSINESS OPPORTUNITY IN FUTURE

If we talk about the food industry at that time there is a large opportunity at an international level. The Indian food and drinks market has witnessed strong growth over the past few years. Liberalization of the economy and growing income of middle class population have had a positive impact on consumer spending and consumption in both rural and urban areas. Indian consumers now spend a significant proportion of their income on food and other essential commodities. Numerous other factors like demographic and macro-economic conditions have also given boost to expenditure on food and beverages in the country. The total food production in India is expected to double in the next ten years and there is ample opportunity for huge investments in food and food processing technologies, skills and equipments. The food processing industry in India stands at US$ 135 billion and is projected to grow with a compound annual growth rate (CAGR) of 10 per cent to reach US$ 200 billion by 2015. The food industry is divided into various segments namely, milk and allied products (dairy), meat and poultry, seafood, bakery and confectionery, fruit and vegetables, grain, pulses and oilseeds (staple) products, alcoholic and non-alcoholic products (beverages), and packaged food. The food processing industry in India is witnessing quick growth. In addition to the demand side, there are changes happening on the supply side as well with the growth in organised retail, increasing foreign direct investment (FDI) in food processing and introduction of new products. The growth has happened because the Government of India has given a priority status to all agroprocessing businesses. Government incentives in the field of mega food parks, cold chain and exports benefits are also playing an important role in encouraging food processing.

CONCLUSIONS & SUGGESTIONS

From the above all these discussion we can say that Maldives has a growing economy in which the tourism, the fishing, travelling & aviation plays an important role. If we talk about the food industry we can have a larger opportunity because most of the people are visiting the Maldives for the fun & enjoyment purpose. The purpose of going to Maldives is touring of the various attractive locations. This will ultimately lead the travelling business to the different level. The development food industry has a wider export opportunity in Maldives because of booming of tourism business & the lack of the agricultural land. This will help the exporter of different countries to export agriculture & food products in the Maldives.