What comes to your mind when you think of cucumbers? Peeled cucumbers discs on a platter... isn’t it? Interestingly, this almost-solitary use of cucumbers in India means their supply is abundant and cheap, which is something a few agri-entrepreneurs have used to their advantage by processing and exporting them to the developed world.
HS Code : 20011000
Dindigul, a city located about 420 km to the southwest of Chennai, apart from its famed tobacco industry – the city used to supply Winston Churchill his favourite cigars – is also home to many units that process, pack and export a very innocuous fruit to the West and Russia – cucumbers. But the export of processed cucumbers – generically called gherkins, although gherkins are actually a different variety of cucumbers – is such a lucrative business that many have made an absolute fortune out of it. The best validation of it being C. Asok Rose, President, Tamil Nadu Gherkin Exporters Association. An early entrant into the business, Rose has been exporting gherkins for over two decades.
"Gherkins Offer Double-Digit Profit Margins In The Range Of 10-14% To Indian Exporters"
Gherkins Profit gherkin exportsare exported in two forms – ready-to-eat (ITC HS Code: 20011000) and bulk, which needs further processing (ITC HS Code: 07114000). And India’s total domination of the market can be gauged from the fact that it is the top exporter in both the categories, accounting for 21.4% of total global exports of the former and an incredible 51.9% of that of the latter. So, what makes India such a powerhouse in gherkins?
Two elements – perfect weather conditions for cucumber farming in states like Andhra Pradesh, Telangana and Karnataka, and a relatively lower domestic consumption (as compared to that in market overseas like USA, Canada, Russia, Australia and Europe). Interestingly, although Andhra Pradesh is the largest producer of cucumbers in the country, gherkins exports actually started from Karnataka in the late 80s.
In many ways, India’s gherkins exports business owes a lot to several factors falling in place at the same time. In the late 80s and early 90s, farmers in traditionally large cucumber exporting countries like Turkey started giving up their farming in favour of tomato cultivation, which was considered more profitable. Around the same time, India was starting to embrace economic liberalisation, with the government encouraging exports in a big way. As part of such export promotion measures, it established agri-export zones (AEZs) in Karnataka and Andhra Pradesh and suddenly everything was in place for the country to take the global gherkins market by storm. Another factor which helped the growth of the country’s gherkins exports was the fact that farmers too preferred a cash crop like cucumber, because it meant they needn’t wait for months to harvest and monetise their produce.
However, if one has to identify the single most important factor behind the success of India’s gherkins industry, it has to be contract farming. Explaining the benefits of contract farming in general, V. A. Balamurali, Managing Partner, Murari Agrotech, a Hosur (Tamil Nadu)-based exporter of gherkins, says, “Under contract farming, corporate houses create large land banks by roping in a number of farmers and providing them seed, fertiliser and technical knowhow. Under it, even crop purchase prices are fixed, and farmers know in advance the price they will get for their produce.”
Since gherkins are exported from India in two forms, their exporters can also be broadly classified into two categories – bulk gherkins exporters and canned/bottled ready-to-eat gherkins exporters. At the same time, even ready-to-eat gherkins exporters can be further categorised into two – MNCs like Reitzel that export only under their own brand, and others, who apart from exporting under their own brand also contract manufacture for large MNC brands, retail chains and quick service restaurants (QSRs). Interestingly, both bulk exporters and ready-to-eat exporters are convinced about their model being better and more sustainable than the other.
Speaking about the benefits of the bulk gherkins business, Rose says, “The taste of people varies from a country to another. Significant investments are needed to develop gherkins and cucumbers that tickle the taste buds of locals. Moreover, one also needs to invest heavily to compete with established brands in different markets. That’s why it’s safe and more sustainable to manufacture in bulk for established branded players. It helps in reaching out to newer markets with minimum investment.” On the other hand, Adarsh Jalan, CEO, Neo Foods, a company which exports ready-to-eat gherkins under its own brand and also contract manufactures for several large MNCs, says, “We are in the final product business. The reason why we don’t prefer intermediate products is because they being low value-added products, offer lower margins.”
A very interesting aspect of India’s gherkins exports is the fact that prices vary a lot on the basis of quality, brand and export market. In fact, depending on these three factors, even ready-to-eat gherkins can actually be cheaper than bulk varieties!
For example, in FY2015, the unit price of India’s ready-to-eat gherkins exports to Russia – the top importer – was $0.69 million/thousand MT as compared to $0.71 million/thousand MT for bulk gherkins. On the other hand, in the same year, the unit price the country’s bulk gherkins exports to France – the top importer – at $0.92 million/thousand MT, was much lower than that for ready-to-eat gherkins, which was $1.35 million/thousand MT. And since Russia imports almost three times more quantity of cheap ready-to-eat gherkins from India than what France does of expensive bulk gherkins, the unit price of the country’s exports of the former, in FY2015, was, actually, lower than that of the latter! Given such massive price differences, quality is of paramount importance in this business. And it’s not an easy task to maintain a ten-on-ten quality, given the fact that it’s an agricultural product. Industry-insiders claim there have been instances where consignments with gherkins that were just 1-2 mm smaller than promised were returned by overseas buyers!
Outlining what the government should do to further consolidate the country’s position as the top exporter of gherkins, Vijai Gill, MD & CEO, The Global Green Group, says, “Instead of trying to incentivise gherkins exports, the government should focus on investing in R&D to develop seed and farm technology.” It’s a no-brainer – government help will no doubt, give a boost to India’s gherkins exporting industry. Exports in excess of Rs.1,200 crore of a lesser known product like “preserved cucumbers”, and one that’s growing each year for the past five years, is a sign of the potential of this fruit in overseas markets. Some reason why the government shouldn’t ignore those trying to make it a bigger business. As for those looking to diversify in exports, this is one cool, natural idea!