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Issues in Supply Chain Management of Mango & Mango Products in Pakistan

S u bmitte d to : P r o f . D r. K h a l i d M u s t a f a C ourse instructor “ Inte rn a tio n a l Ma rk e ting ”

Submitted by: M r. Z a h i d A l i Regd. N o. 88-ag-1357 MB A -Ma rk e tin g & A g rib u sin ess Leading to Ph.D .

D e pa r t m en t of M a r k et i n g & A gr i b u s in e s s University of Agriculture, Faisalabad

Issues in Supply Chain Management of Mango & Mango Products in Pakistan Abstract: The objective of the article is to explore the mango supply chain in Pakistan with a focus on the potential problems that are affecting the overall efficiency of the chain. The article started with a contextual overview giving a sufficient understanding of the significance of the mango and mango industry in Pakistan. The following sections discussed the domestic and export markets of mangoes, Supply chain participants, structures and potential constraints. The closing sections are dedicated to presenting the important impediments and possible remedies.

1. Mango: the Context & Significance 1.1

Overview

Pakistan is blessed with vast agricultural resources on account of its fertile land, wellirrigated plains, extremes of weather, and centuries old tradition of farming. It is because of its central importance in the economy that the Government has identified agriculture as one of the four major drivers of growth. According to an estimate, the total value of agriculture crops at current factor cost is estimated at Rs.550.268 billion, divided into major crops Rs.407.623 billion and minor crops including horticulture Rs.142.645 billion. The horticulture crops (fruits, vegetables & condiments) alone contribute Rs.116.645 billion, equivalent to US$ 2 billion, which is 26% of the total value of all crops and 81.8% of the total value of minor crops. Pakistan annually produces about 12.0 million tons of fruits and vegetables. Citrus fruit is leading in term of production followed by mango, dates and guava. Potato and onion are leading among vegetables and condiments. Fruit and vegetable export trade

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in Pakistan amounts to US$ 134 million (2003/04), of which fruits account for US$ 102.7 million (76.6%), vegetables US$ 25.7 million (19.2%) and fruit & vegetable preparations (mostly juices) US$ 5.6 million (4.2%). Their share in Pakistan’s total exports is slightly over one percent. Pakistan has unique but unsophisticated network of up to six or seven intermediaries between the primary source (producer and growers) and the end user. Because of the presence of so many layers and the lack of adequate marketing infrastructure facilities, 30 to 40% of the perishable produce gets spoiled before reaching the ultimate consumer. Mango is one of the most important tropical fruits, which has experienced tremendous developments in recent years. One of the main reasons is shift from air to sea freight with bulk deliveries at competitive prices. Pakistan is the 5th largest producer and the 3rd largest exporter of mango in the world. Its soil and climatic conditions enable production and market supplies of good quality fresh mango over a period of about 5 to 6 months. Pakistani mangoes therefore enjoy a prominent position in the international market.

1.2

Mango Production & Mango Industry in Pakistan

Mango (Mangifera indica), ‘the king of fruits’, is native to Southern Asia, especially Burma and Eastern India. Mango is considered as the fruit of excellence and thus has a prominent position among the commercial fruits grown in Pakistan. Pakistan is the world’s fifth largest mango producer with an annual crop of around one million tones. It exports about 80 000 tones, mainly to the Middle East and the UK. Less than 3 per cent of the crop is used for processing, mostly into mango pulp. Production is centered in the regions of the Punjab and the Sindh. Harvest begins in the Sindh in late May and finishes in the Punjab in late August. The principal varieties are Sindhri, which dominates Sindh production, and Chaunsa, which dominates Punjab production. Pakistan mangoes are sweet, aromatic, yellow skinned and soft. Mango farms range in size from less than 2ha to more than 400ha. Production of mangoes in Pakistan has exhibited an overall increasing trend over the years as is evident from the data presented in Table 1: Table 1: Production of Mangoes in Pakistan Year 1999/00 2000/01 2001/02 2002/03

Production (000 tons) 937.7 989.8 1037.1 1034.6

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2003/04 2005/06 (Provisional)*

1056.0 1200.0

Source: Fruit, Vegetables and Condiments Statistics of Pakistan, 2003/04, Ministry of Food, Agriculture & Livestock, Islamabad * Based on key informants (farmers & traders) opinion survey

Punjab and Sindh are main mango producing provinces. Province-wise production (Table 2) shows that Punjab leads with 67.0% share in mango production in the country followed by Singh with 32.1%, Balochistan 0.6% and NWFP 0.3%. Table 2: Province-wise Production of Mangoes in Pakistan, 2003/4 Province Punjab Sindh Balochistan NWFP

Production (Tons) 707,799 338,415 6,625 3,148

Percent 67.0 32.1 0.6 0.3

Source: Fruit, Vegetables and Condiments Statistics of Pakistan, 2003/04, Ministry of Food, Agriculture & Livestock, Islamabad

Production, post-harvest and marketing systems are poorly developed and returns are distributed quite unevenly, favoring middlemen. Fruit quality is generally poor and 30 to 40 per cent of fruit is wasted in the harvest-to-market system. Modern infrastructure for cool storage, grading, post-harvest treatment and transport is almost non-existent. Periodic gluts occur on domestic markets and with no capacity to store fruit, heavy discounting of retail prices is common. The export market faces similar challenges. Pakistan mangoes have a reputation as being cheap and of poor quality, and exporters have a tendency to dump fruit in markets such as the UAE. In general, there is little evidence of a value-oriented approach to supply chain management and there are concerns that current returns for growers are unviable. Compounding this situation, mango tree dieback, decline and poor tree management practices are beginning to further reduce productivity. Most farms in Pakistan have a mix of enterprises with very few producing only mangoes. Mango plantations (called ‘gardens’) range in size from small 2 hectare holdings up to 400 hectares. The industry has a forward contract system where most farmers sell their crop at flowering or soon after to contractors acting on behalf of commission agents. Thus very few mango farmers in Pakistan are responsible for selling or marketing their own crop. The industry faces a number of major challenges, particularly in post-harvest handling systems, where fruit losses of 30 to 40 per cent are common and overall quality is dramatically impacted. There is no cool chain management and with ambient temperatures often around 500C during harvest, fruit has a very short shelf life.

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Periodic gluts occur on domestic markets and with no capacity to store fruit, heavy discounting of retail prices is common. The export market is facing similar challenges. Pakistan mangoes have a reputation as being cheap and of poor quality, and exporters have a tendency to dump fruit in markets such as the UAE. Sales of Pakistan fruit in many export markets are to the local expatriate (Pakistani/Indian) communities and it is not clear if substantial inroads are being made in the wider global supermarket trade. In general, there is little evidence of a value-oriented approach to supply chain management and the industry is concerned that current levels of returns for growers are making the crop unviable. Compounding this situation, poor mango tree management practices further reduce farmers’ returns.

1.3

World Mango Production: Some Important Facts

Approximately 50% of all tropical fruits produced worldwide are mangos. As there has been increasing demand for mangos throughout the world, especially in the United States of America and in Europe, production has been increasing as well over the past decade (Department of Agriculture, Germany 1996: 2). The Food and Agriculture Organization of the United Nations estimates worldwide production of mangos at more than 23 million tons in 2001. With 10 million tons India accounts for almost half of the world production of mangos, followed by China (3 million tons), Mexico (1.5 million tons) and Thailand (1.35 million tons) (FAO Statistics, 2002). In fact, the aggregated production of ten countries is responsible for roughly 80% of the entire world mango production. And most mango producing countries still have potential to increase their production. This is especially true for such countries as China, Indonesia, and Mexico. (Department of Agriculture, Germany 1996: 2) One noticeable fact is that basically all of the mango producing countries (more than 99%) are either developing or emerging countries (Department of Agriculture, 1996: 2). Industrialized countries only have very limited mango production. Europe is not very active in the production of mangos. The same applies to the United States of America, which only have marginal mango production (under 3,000 tons in 1999) in Florida and Hawaii (FAO Statistics, 2002). The Australian mango industry is highly innovative and based upon research. The same applies to Israel. Both countries consider mangos a serious export industry and spend a lot of money for research and development of new and better varieties. (Crane et al, 1997: 203-204) All large mango producing countries have in common that the vast majority of their mangos are consumed domestically. In 1999, only 2% of all worldwide produced mangos were exported. The remaining 98% remained with consumers in the producing countries (own calculations based on FAO Statistics, 2002). Processed mangos only account for very small percentages of consumed mangos (in the range of

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one and two percent). Most processing is done by the farmers and their families for their own consumption or for selling it on local retail markets. Only a small part is commercial processing and intended for international trade. (Department of Agriculture, Germany 1996: 15-16)

1.4

Mango Harvest Season: Pakistan & World

Pakistan produces quite a few mango varieties. They differ in harvesting time and also in their physiological characteristics especially size, shape, colour, sugar level, & acidity etc. Only a few varieties offer volumes and are thus important from export point of view. Pakistan mango harvest season overlaps with many other countries. Table 3: Mango Maturity Days/Indicative Harvest Periods in Pakistan Variety Sindhri Langra

Day of full bloom Mid-February Mid-February

Earliest date for harvest Early June Early June

Doshehri Bombay Green Chaunsa Kali Seroli Bagan pali Swarnarika Neelum

Mid-January Mid-January Early February Early February Mid February Mid March Mid February

Late May Mid May Late June Mid June Early July Mid July Early September

Days to harvest 110 110 118 113 150 135 130 122 201

Table 4: Mango Harvest Seasons in Main Mango Producing Countries Country Pakistan Philippines Mexico Madagascar Malaysia Kenya Jamaica Indonesia India Guatemala Egypt Chile Brazil Australia Peru Venezuela

Jan

√

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

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√

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√ √

Nov

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Dec

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Source: Courtesy Trade & Transport Facilitation Project, UNCTAD

Pakistan can extend its mango season as some new varieties of mangoes can ripen as early as mid-April and late by October. Pakistan could have a better marketing position on the international market if adequate volumes could be supplied over extended periods. There are thousands of varieties of mango grown in the world. The leading varieties grown in various countries are listed in Table 5. Table 5: Leading Mango Varieties in the World Countries Pakistan India Mexico Mali Kenya Philippines West Indies South Africa

Varieties Sindhri & Chaunsa Alphonso Tommy Atkins Amelie Carabao Pico Julie Kent

Source: Courtesy Trade & Transport Facilitation Project, UNCTAD

Sindhri like many mango varieties suffers from anthracnose, a fungal disease that produces dark sunken spots on fruit, stems, and leaves and stem end root. Both spoil its cosmetic appeal. Similarly Chaunsa has a problem of soft nose.

1.5

Institutional frameworks

A study of institutional frameworks has become the subject of a separate project. The mango industry in Pakistan operates in a largely unregulated environment. The Rapid Export Growth Strategy could provide considerable impetus to developing the mango industry. The main supporting agency for the mango industry is the PHD&EB, which is doing an excellent job. Opportunities exist to strengthen institutions such as the University of Agriculture Faisalabad.

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2. Mango Export Markets and Recent Trends 2.1

Mango Exports: Pakistan

Mango is the 4th most rapidly growing trade after taro, single strength citrus juice and cassava tapioca. The world trade in mangoes including re-exports grew almost three times during the past decade. Current mango trade is estimated around 650,000 tons per annum. The prominent mango exporting counties include Mexico, Brazil, Pakistan, India, Philippines, Ecuador, Peru, South Africa & Thailand. Similarly, the prominent mango importing countries include UAE, Saudi Arabia, Malaysia, USA, UK, Netherlands, United Kingdom, France, Germany and Japan. Mango is the leading exportable fruit from Pakistan after citrus. The country produces over one million tons of mangoes of which about 60 to 70 thousand tons are being exported. Export statistics for the past 5 years are contained in Table 6. Exports during the past 5 years vary from 5% to 7% of the total production of mangoes in Pakistan. Table 6: Export of Mango during the past 5 Years (1999/00-2003/04) Year 1999/00 2000/01 2001/02 2002/03 2003/04

Export Volume (000 tons) 47.602 53.444 47.541 58.844 77.468

Export value (000 US$) 11,576 17,005 14,036 17,626 23,426

Source: Federal Bureau of Statistics, Government of Pakistan, Islamabad.

Gulf and Saudi Arabia are traditional import markets and thus consume the major volume. England is the main market in Europe. Germany, France, Norway, Denmark, Switzerland, Singapore, Malaysia and Hong Kong are other important markets. Peoples Republic of China and Iran are likely to emerge as future prominent markets. The regional distribution of mango exports is appended below: Middle East/Gulf

Far East

Europe

Others

60,761 tons

532 tons

11,440 tons

4,735 tons

(78.4%)

(0.7%)

(14.8%)

(6.1%)

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Table 7: Projected Mango Exports from Pakistan Year 2005/06 2006/07 2007/08 2008/09 2009/10

Volume (000 tons) 100 110 125 150 200

Value (000 US$) 40 46 55 70 100

The export projections are based on the following assumptions:  Compliance to sanitary & phyto-sanitary measures thru GAP  Provision of physical infrastructure to address quarantine issues, for instance, CA storage, vapour heat treatment, hot eater dip and irradiation facilities  Improved shelf life through better varieties, cultural practices and infrastructure (CA storage, Irradiation)  Improved logistics (air & sea)  Improved market access thru FTAs, PTAs, and MOUs etc.  Market promotion (delegations, expositions, media)

2.2

Mango Exports: The World

Between 500 and 1,000 different varieties of mangos exist throughout the world according to different estimates – however, only a few are traded internationally. (Morton, 1987 and Londonfruit, 2000). In 1999, the entire world mango trade was 576,000 tons. Mexico is the world’s largest exporter of mangos, accounting for more than 200,000 tons (35% of global mango exports) in 1999. Brazil and India follow, each having a share of approximately 50,000 tons or 9%, respectively. (FAO Statistics, 2002) Mexico and other Latin American countries, mainly Brazil, Colombia, Ecuador, Guatemala, Haiti, Venezuela, and Peru are exporting the majority of their mangos to North America, especially to the United States of America, but also to the European Union. In fact, Mexico is the major supplier of the United States of America and Brazil is the major supplier of Europe (MarketAg, 2002). More than 91% (i.e. more than 186,000 tons) of all Mexican mango export is shipped to its neighboring country in the north (Crane et al, 1997: 207) The total volume of Latin American mango exports in 1999 was approximately 326,000 tons, almost half of all the world’s mango exports. (Calculations based on FAO Statistics, 2002)

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Major exporters from Africa are South Africa and Côte d’Ivoire. Their most important markets are France and the Netherlands as well as other countries from Europe. Other African suppliers include Kenya, Mali, Burkina Faso, Gambia, and Guinea (MarketAg, 2002). In 1999, total fresh mango exports from the entire African continent accumulated to more than 31,000 tons. (Calculations based on FAO Statistics, 2002) In the Middle East, Israel mostly produces for the European Union and regional markets. Fresh mango exports from Arabian countries, including Israel were 10,649 tons in 1999. (Calculations based on FAO Statistics, 2002 and MarketAg, 2002) Asia, the largest producer of mangos, exported close to 144,000 tons of fresh mangos in 1999. With less than one fourth of world mango exports, Asia is the second most important mango exporting region after Latin America. However, more than 4,600 tons are re-exports, especially from Hong Kong. (Calculations based on FAO Statistics, 2002). The most important market for India and Pakistan is the United Kingdom. Other important mango exporters from Asia such as the Philippines, Australia, Taiwan and Thailand predominantly ship their varieties to regional Asian markets, especially to Japan, Singapore and Hong Kong. This is mainly due to the fact that consumers in the Far East have been familiar with mango and mango products for thousands of years whereas it is still a rather exotic fruit in the western hemisphere. (MarketAg, 2002) Europe’s fresh mango exports of 64,000 tons are only intra-European re-exports. The fresh mangos arrive in the harbors of Rotterdam, Hamburg and Antwerp and are then distributed further among the countries in the Union. (Calculations based on FAO Statistics, 2002 and MarketAG, 2002)

2.3

Export Market Trends

The trend in marketing agricultural produce is toward fewer and larger processors and handlers. Farmers, too, are becoming fewer and larger, but their size and power in the market place remain small in comparison with processor/handlers. Packing house facilities are operating in many fruit and vegetable markets around the world. Growers associations or cooperatives negotiate terms of trade with commercial companies. However, most of the time growers are operating in buyers mark...