ONION MARKETING STRATEGY
Pakistan Horticulture Development & Export Board January 2006
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CONTENTS PHDEB Overall Strategy • •
Schematic View Activities/Outputs
Potato Overview • •
Background Information Onion Production o World Onion Production o Pakistan Onion Production o Harvest Seasons o Prominent Onion Varieties
• •
Marketing System Onion Export o World Onion Exports o World Onion Imports o Pakistan Onion Exports o Mode Sale and Price Calculations o Export Constraints o Projected Onion Exports
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Development Strategy o Product Improvement o Infrastructure Development o Market Promotion o Facilitation o Regulations
Onion Export Marketing Plan 2006 Crop • • • •
Preamble Export Targets Allocation of Export Targets Market Based Interventions o Sri Lanka o Malaysia o East Europe
Grades & Quality Standards
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PHDEB OVERALL STRATEGY
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PHDEB OVERALL STRATEGY PHDEB Strategy - Schematic View Global Trade (US$ 78 b)
Mission
High price end/niche markets Marketing
Regulatory Policy • Quality Standards • Pre-shipment Inspection • Trade Policy/ Regulations • WTO/HACCP/ EUREPGAP
Infrastructure
• Trade Policy Projects
Pre-harvest • Farmers Cooperatives • Demonstration Farms • Certified Seeds & Plants • Research & Development • Technology • Crop Economics
• Food Irradiation • Value Addition • Logistics • Technology (Plasticulture) • Business Plans
• Foreign Investments • New Markets • Market Promotion • Branding • Overseas Offices • FTAs / PTAs
Products • Kinnow • Mango • Dates • Potato • Onion • Temperate fruits • Flora • Vegetables
Database
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PHDEB –Strategy Mission:
High price end/niche international markets
Products: 1. 2. 3. 4. 5. 6. 7. 8. 9.
Kinnow Mango Dates Potato Onion Temperate fruits Flora products (cut flowers, foliage) Vegetables Processed products
Broad Working Areas 1. 2. 3. 4.
Pre-harvest Infrastructure Regulatory/Policy Marketing
Outputs/Activities/Interventions 1.0 Pre-harvest 1.1 Farmers associations/cooperatives 1.1.1 Citrus (kinnow) 1 (Punjab) 1.1.2 Mango 2 (Punjab & Sindh) 1.1.3 Dates 3 (Khairpur, D. I. Khan & Turbat) 1.1.4 Temperate Fruits 3 (NWFP, NAs, Balochistan) 1.1.5 Potato 2 (Punjab) 1.1.6 Onion 2 (Sindh & Balochistan) 1.1.7 Flora 4 (Punjab, Sindh, NWFP & Balochistan) 1.1.8 International expert 1.2 Model demonstration farms 1.2.1 Citrus (kinnow) 5 Punjab 1.2.2 Mango 2 (Punjab & Sindh) 1.2.3 Temperate Fruits 3 (NWFP, NAs, Balochistan) 1.2.4 Flora 4 (Punjab, Sindh, NWFP & Balochistan) 1.3 Certified seeds & plants 1.4 Research & Development 1.5 Economics of fruits & vegetable cultivation 6
2.0 Infrastructure 2.1 Value addition 2.1.1 Processors meeting/contacts 2.1.2 Pre-feasibility reports/business plans (SMEDA, BOI, EAC, DFIs, ….) 2.1.3 Presentations in CC & Is 2.2 Logistics 2.2.1 Reefers availability (Regional/Inland) 2.2.2 GenSets 2.2.3 Shipping companies 2.2.4 Air cargo space (PIA, charters flights…..) 2.2.5 Pakistan Railways 2.2.6 NATCO, NLC & private sector 2.3 Technology 2.4 Trade policy initiatives/Food irradiation 2.4.1 Projects follow up 2.4.2 Monitoring system 2.4.3 Cool van proposal 3.0 Regulatory/Policy 3.1 Quality standards 3.2 Pre-shipment inspection 3.3 Regulations/Trade policy 3.4 Compliance (WTO, EUREPGAP, HACCP, SPS…..) 3.4.1 Workshops 3.4.2 Seminars 3.4.3 Website 3.4.4 HortiMag 3.4.5 Extension material 3.4.6 Print media (Articles) 3.4.7 Documentaries 4.0 Marketing 4.1 Foreign investment (JVs) 4.2 New markets 4.2.1 Mapping of potential foreign markets 4.2.2 Quarantine requirements 4.3.2 Compliance
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4.3 Trade agreements/protocols (PTAs, FTAs,…..) 4.4 International branding & market promotion 4.4.1 International expert on brand development 4.4.2 Overseas offices (Europe, Far East, Middle East) 4.4.3 Publicity (Fruit Journals, printed matter) 4.4.4 Exhibitions 4.4.5 Delegations 4.5 Local branding & distribution system
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ONION OVERVIEW
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PAKISTAN HORTICULTURE DEVELOPMENT & EXPORT BOARD
Onion Marketing Plan 1. 0 Background Information Pakistan is blessed with vast agricultural resources on account of its fertile land, well-irrigated 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 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. Onion is one of the main cash crops for the farmers as well as among the main exportable horticulture commodities from the country. Therefore, development of onion crop will improve farm incomes and foreign exchange earnings. 2.0 Onion Production 2.1 World Onion Production It is estimated that annually about 55 million tons of onions are produced all over the world. In many parts of the world it is staple food of the people. Table 1 shows world potato producing leaders:
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Table 1: World Leaders in Onion Production 2004 Ranking Country Production (000 Tons) % Share 1 China 18,035,000 32.7 2 India 5,500,000 10.0 3 United States of America 3,669,540 6.6 4 Turkey 1,750,000 3.2 5 Russian Federation 1,673,420 3.0 6 Pakistan 1,657,900 3.0 7 Iran 1,450,000 2.6 8 Japan 1,125,000 2.0 9 Brazil 1,120,680 2.0 10 Spain 1,083,700 2.0 Source: Food and Agriculture Organization of the United Nations, Rome, Italy (www.fao.org) China and India contribute almost half of world onion production. The world market for onion is expanding with the increase in global population. The statistics reveal that exporting countries are almost maintaining their share with of course some bad years due to bad crop. 2.2 Pakistan Onion Production Pakistan annually produces about 1.5 million tons of onion. Though subjected to annual variations, overall area and production of onions in Pakistan have shown an increasing trend during the past 5 years (Table 2): Table 2: Area and Production of Onions for the Period from 1999/00 to 2003/04 in Pakistan Year Area (‘000’ ha) Production (‘000’ tons) 1999/00 109.8 1648.0 2000/01 105.6 1563.3 2001/02 103.8 1385.0 2002/03 108.0 1427.5 2003/04 109.0 1449.0 Average (1999-2004) 107.2 1494.5 Source: Agricultural Statistics of Pakistan, Ministry of Food, Agriculture and Livestock, Government of Pakistan, Islamabad. Sindh is the leading onion producing province in Pakistan followed by Balochistan, Punjab and NWFP. Province-wise area and production of onion are presented in Table 3: Onion in Punjab is mainly produced in Southern part comprising of Khanewal, Vehari, Okara, D. G. Khan, Bahawalpur and R. Y. Khan districts. Ghotki, Nausherhro Feroze, Nawabshah, Shikarpur, Sanghar, Mirpur Khas and Hyderabad are main onion producing district in Sindh. Similarly Swat and Dir in 11
Table 3: Province-wise Production of Onions in Pakistan (2001/04 Ave) Province Area (000 Ha) Production(000 Tons) % Share Punjab 25.5 247.7 17.0 Sindh 51.4 646.1 44.4 NWFP 10.1 192.6 13.2 Balochistan 20.0 369.8 25.4 Pakistan 107.0 1456.4 Source: Agricultural Statistics of Pakistan, Ministry of Food, Agriculture and Livestock, Government of Pakistan, Islamabad. NWFP and Mastung, kalat and Chagai are main onion producing districts in Balochistan. 2.3. Onion Harvest Seasons The agro-ecological diversity obtained in the country enables production of onions almost around the year. However, production volumes greatly differ from crop to crop as follows: • • • •
June-July August-September August-October November-May
Punjab & NWFP Plains (13%) NWFP Uplands (16%) Balochistan (26%) Sindh (45%)
It is apparent from the above that bulk of the onion crop is harvested from August thru to May. The augmented supplies tend to keep prices in the domestic market low thereby offering an opportunity for export. Therefore, onion exports are mainly undertaken during this period, predominantly from Sindh crop. Due to limited shelf life and absence of suitable cold storage facilities in the country, onions can not be held over an extended period and have to be disposed in the domestic and international market as fresh harvest. 2.4 Prominent Onion Varieties There are two commercially grown varieties i.e. Pulkara and Red Sindh. In Balochistan, Sariab Red is also commercially grown. 3.0 Marketing System Onion trade is in private hands. The Government’s role is confined to physical infrastructure development especially wholesale markets & communication, market intelligence, market promotion and regulatory measures for smooth business operations. Flow chart of onion for export and domestic marketing is presented through Diagram 1: 12
DIAGRAM 1: FLOW CHART – ONION Export Marketing Exporter Harvesting Sorting Packing Transport
Wholesale Market
Grading Packing Transport
Shipment by Sea/Road
Importer/ Wholesale
Retailer
Consumer
Farm
Harvesting Grading Packing Transport
Wholesaler
Pharia/ Mashakhor
Retailer
Domestic Marketing 4.0 Onion Export 4.1 World Onion Exports
The World onion export market is 4 to 5 million tons per annum. The top 10 market leaders are mentioned in Table 4. Table 4: Top 10 Onion Exporting Countries of the World (2004) Ranking Country Exports % Market Share 1 India 833,230 17.9 2 Netherlands 777,447 16.7 3 China 419,678 9.0 4 Egypt 350,571 7.5 5 United States of America 301,967 6.5 6 Argentina 224,018 4.8 7 Poland 173,970 3.7 8 Kazakhstan 107,059 2.3 9 Malaysia 104,569 2.3 10 Uzbekistan 95,322 2.1 Source: Food and Agriculture Organization of the United Nations, Rome, Italy (www.fao.org)
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India, Netherlands, China, Egypt and United States of America are prominent among top 10 onion exporting countries of the world. 4.2 World Onion Imports The top 10 onion importing countries of the world are mentioned in Table 5: Table 5: Top 10 Onion Importing Countries of the World (2004) Ranking Country Exports % Market Share 1 Russian Federation 1,633,569 35.3 2 Bangladesh 359,589 7.8 3 United States of America 312,632 6.8 4 United Kingdom 276,508 6.0 5 Japan 274,015 5.9 6 Germany 272,791 5.9 7 Saudi Arabia 239,738 5.2 8 Malaysia 205,172 4.4 9 Belgium 158,331 3.4 10 Canada 150,586 3.3 Source: Food and Agriculture Organization of the United Nations, Rome, Italy (www.fao.org) Table 5 shows that Russian Federation alone imports more than one third of onion traded globally. Bangladesh is the second largest importer of onion. 4.3 Pakistan Onion Exports The annual export of onion from the country averaged about 50,000 tons during the past 5 years. Yearly exports are given in Table 6: Table 6: Export of Onions from Pakistan, 2000/05 Year Quantity (tons) Value (000 US$)
Price per kg (US$) 2000/01 77,168 10,280 0.133 2001/02 53,379 5,427 0.102 2002/03 63,711 6,086 0.096 2003/04 49,078 6,332 0.129 2004/05 29,597 3,761 0.127 Source: Federal Bureau of Statistics, Government of Pakistan, Karachi. The lowest export figure in 2004/05 is attributed to bad crop harvest pushing prices upward in the domestic market and rendering exports un-economical. In
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199/00 Pakistan exported 128,672 tons of onions. Generally speaking average annual exports of onion range from 50,000 to 60,000 tons. Per unit export prices are also low which apparently are attributed to produce quality. Onions for export are sourced from the wholesale market, manually regarded and repacked according to exporters’ choice and generally shipped thru non-reefer open top containers. The repeated and rough handling, extended time between harvesting and product preparation for export, holding produce under undesirable conditions tend to adversely impact the produce quality and as a consequence its marketability and sale price. The destination-wise exports of onion are given in Table 7: Table 7: Country-wise Export of Onion from Pakistan Country Onion (2000-2005 Ave) Quantity (000 tons) Percent UAE 24,277 45.3 Sri Lanka 13,848 25.9 Malaysia 3,532 6.6 Others 11,913 22.2 Total 53,570 Source: Federal Bureau of Statistics, Government of Pakistan, Karachi (Computed) UAE and Sri Lanka are the main markets for onion exports from Pakistan. Both these markets are very convenient and Pakistan has the potential to increase market share. 4.4 Mode of Sale and Price Calculations Onion exports are mostly on consignment sale basis. The FOB price per 10 kg and 15 kg commonly used packing is estimated as follows (January 2006):
Cost of graded onion@ Rs.250/40 kg Cost of packaging (poly propylene) Labor cost including grading, packing palletization & loading Clearing & forwarding charges FOB
10 kg
15 kg
62.50 07.00
93.75 09.00
08.00 05.60
08.00 08.40
83.10 119.15 (US$ 1.385) (US$ 1.986)
Sea freight to different destinations is given in Table 8 below:
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Table 8: Sea Freight from Karachi to Different Destinations Country Port of Entry Non-reefer 20 Reefer 40 feet feet Malaysia Kuala Lumpur 200 1800 Malaysia Penang 200 2400 Sri Lanka Colombo 300 1700 UAE Dubai 300 1800 Russian Federation St. Petersburg 2000 5000 Saudi Arabia Jeddah 650 2800 Damam 600 2800 Bangladesh Chitagong 700 2400 4.5 Export Constraints • • • • • •
Product sourcing (procurement) from wholesale market Limited existing markets (UAE, Sri Lanka and Malaysia) No market promotion No attempt for market expansion – access to new potential markets Lack of physical infrastructure (grading plants) Lack of R&D support
There is need to consolidate position in the existing markets especially UAE, Sri Lanka and Malaysia thru market promotion and consistently supplying quality produce, and also identify new markets. Bangladesh annually imports onion about 360,000 tons, Saudi Arabia 240,000 tons, Malaysia 200,000 tons, UAE 150,000 tons and Sri Lanka 125,000 tons. Pakistan can substantially increase its share in these markets. In addition, Pakistan has established a foothold in Russian Federation by exporting kinnow and its exports are constantly increasing. Russian Federation annually imports about 1,634,000 tons onion. Pakistan can have a reasonable market share by using existing business connections. 4.6 Projected Onion Exports The projected/targeted exports of onions from Pakistan over the next 5 years are presented in Table 9: Table 9: Projected Onion Exports from Pakistan Year Volume (000 tons) Value (000 US$) 2005/06 75,000 2006/07 100,000 2007/08 125,000 2008/09 150,000 2009/10 175,000
9,000 13,000 16,875 21,000 25,000
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The export projections are based on the following assumptions: • • • •
Consolidation of position in existing markets thru strong market promotion Access to new markets thru delegations, promotions, FTAs, EHPs (where possible) Development of physical infrastructure like grading plants in the production areas. Improvement in quality & yields
The increase in revenue will be both on account of increased volumes and improved quality and presentation of the produce offered in the international market. Pakistan has to strive hard to enlarge its share in the existing and penetrate into the new markets. It should be kept in mind that our competitors especially India are better organized in terms of product quality, consistent supplies, logistics and market promotion. 5. Development Strategy 5.1 Product Improvement • • •
Improvement in farm management practices leading to better quality and more yields Introduction of new cultivars based on targeted import markets requirements Introduction of Onion cultivars suitable for processing like dehydration.
5.2 Infrastructure Development • Pack-house facilities • Irradiation 5.3 Product Promotion • Delegations • Products display in international expositions • Website • International media • Pamphlets, leaflets etc. 5.4 Facilitation 5.4.1 Awareness • Seminars/workshops • Printed matter (posters, leaflets)
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• •
Media Videos
5.4.2 Training • Training of trainers • Farmers/farm labour • Pre-harvest contractors • Exporters/traders • Staff of line departments 5.5 Regulation • National grades & quality standards • Pre-shipment inspection • HACCP • EUREPGAP
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ONION EXPORT MARKETING PLAN 2005/06
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Pakistan Horticulture Development & Export Board Onion Export Marketing Plan 2006 Preamble Onion is one of the five main exportable commodities from Pakistan. It is also cash crop fro the farmers. However, it has not been given due attention due to which both onion production and export have not kept pace with the changing international market requirements. There is hardly any physical infrastructure available for efficient post-harvest management of onions. As a result, exports have not established a clear trend. In fact, exports have declined over the time. There is need to concentrate on improving product quality, availability and postharvest management in order to enlarge its exports. Export Target Target (2006 crop)
75,000 tons
US$ 9,000,000
Allocation of Export Targets (Additional) India UAE Sri Lanka Malaysia
35,000 tons 5,000 tons 2,500 tons 2,500 tons
Product Flow: Schematic View
Preharvest
Harvest & Postharvest
Improved farm management
Proper curing Sorting Proper packing
Infrastr ucture/ logistics
Marketi ng
Exports US$ 9 Mil
Reefer transport Delegations/ Mechanical grading Expositions Radiation (trials) Access to new markets Publicity (Media)
Interventions •
Field Demonstrations - Disease management - Clean cultivation - Improved curing - Sorting & grading 20
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Weight standardization (50 kg)
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Good Agriculture Practices (GAP) - Awareness seminars on EUREPGAP - Training of trainers
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Infrastructure Development - Improvement of wholesale markets (DoA Sindh & Balochistan) - Pack-houses with grading & packing facilities
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Export Facilitation - Farmers/Exporters contacts - Logistics (road/sea) - Institutional support (Plant Quarantine, ANF)
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Market Promotion - Delegations - Publicity
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Research and Development - Disease management - Irradiation to enhance shelf life - New cultivars trials including cultivars suitable for processing
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Value addition - Onion Flakes - Onion Powder - Fried onion
Market Based Interventions UAE Sri Lanka Malaysia Bangladesh Russian Federation
Improved presentation & Market promotion Improved presentation & Market promotion Improved presentation & Market promotion Trials on shipment by refrigerated container & promotion Trials on shipment by refrigerated container & promotion
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GRADES AND QUALITY STANDARDS
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DRAFT STANDARDS Concerning the marketing and Commercial Quality Control of Onion I.
DEFINITION OF PRODUCE
These standards apply to onions of varieties (cultivars) grown from Allium cepa L., to be supplied to the consumer in export markets in the natural state, green onions with the full leaves and onions for industrial processing being excluded. II.
PROVISIONS CONCERNING QUALITY
The purpose of the standards is to define the quality requirements of onions after preparation and packaging for export. A. Minimum requirements: In all classes, subject to the special provisions for each class and the tolerances allowed, the onions must be:
Intact, sound; produce affected by rotting or deterioration such as to make it unfit for consumption is excluded, clean, practically free of any visible foreign matter, the outer skin of the onion must be fully dried, without hollow or tough stems, practically free from pests, practically free from damage caused by pests, free of abnormal external moisture, free of any foreign smell and/or taste.
In addition the stems must be twisted or clean cut and must not exceed 3cm in length. The development and condition of the onions must be such as to enable them:
to withstand transport and handling, and to arrive in satisfactory condition at the place of destination.
B. Classification: The onions are classified into two classes defined below: i.
Class I: Onions in this class must be of good quality. They must be characteristic of the variety. The bulbs must be:
firm and compact,
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un-sprouted (free from externally visible shoots), free from swelling caused by abnormal development, practically free of root tufts.
The following defects (not exceeding 2% in a lot) may be allowed provided these do not affect the general appearance of the produce, the quality, the keeping quality and presentation in the package: a slight defect in shape, a slight defect in colouring, light staining which does not affect the last dried skin protecting the flesh, provided it does not cover more than one-fifth of the bulb's surface, superficial cracks in, and absence of part of the outer skins, provided the flesh is protected.
ii.
Class II:
This class includes onions which do not qualify for inclusion in Class I, but satisfy the minimum requirements specified above. They must be reasonably firm. The following defects (not exceeding 5% in a lot) may be allowed provided the onions retain their essential characteristics as regards the quality, the keeping quality and presentation:
III.
defects in shape, defects in colouring, traces of rubbing, small healed cracks, slight bruising, healed, unlikely to impair keeping qualities, stains which do not affect the last dried skin protecting the flesh, provided they do not cover more 10% of the bulb's surface, cracks in the outer skins and the absence of a part of the outer skins from not more than 10% of bulb's surface, provided the flesh is not damaged. PROVISIONS CONCERNING SIZING
Size is determined by the maximum diameter of the equatorial section. Onion will be graded according to following sizes: IV.
Large Medium Small General
64mm and above 51-64mm 38-51mm 24-38mm
PROVISIONS CONCERNING TOLERANCES
Tolerances in respect of quality and size shall be allowed in each package for produce not satisfying the requirements of the class indicated. A. Quality tolerances:
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i.
Class I: 5% by number or weight of onions not satisfying the requirements of the class, but meeting those of Class II or, exceptionally, coming within the tolerances of that class,
ii.
Class II: 10% by number or weight of onions satisfying neither the requirements of the class, nor the minimum requirements, with the exception of produce affected by rotting or any other deterioration rendering it unfit for consumption.
B. Size tolerances: For all classes: 5% by number or weight of onions not satisfying the size identified, but with a diameter of no more than 10% below or above it. V.
PROVISIONS CONCERNING PRESENTATION
A. Uniformity: The contents of each package must be uniform and contain only onions of the same origin, variety, quality and size. B. Packaging: Onions must be packed in such a way as to protect the produce properly. The materials used must be new, clean and of a quality such as to avoid causing any external or internal damage to the produce. The use of materials, particularly paper or stamps, bearing trade specifications is allowed provided the printing or labelling has been done with non-toxic ink or glue. Packages must be free from all foreign matter. C. Presentation: Onions may be presented in appropriate packages. These may include polypropylene net bags, jute sacks or other such packages specified in the sale contract and allowed in the country of import. The packages must be attractive and secure. VI.
PROVISIONS CONCERNING MARKING
Each package must bear the following particulars in letters grouped on the same side, legibly and indelibly marked, and visible from the outside either printed on the package itself or on a label secured to the fastening. If the labels are placed inside the packages (string woven bags), it should be done in such a way that the indications concerning marking are readable from the outside. A. Identification:
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Packer and/or Dispatcher
) Name and address or ) officially issued or ) accepted code mark
B. Nature of produce: ‘Onions’ if the contents are not visible from the outside. C. Origin of produce: Country of origin and, optionally, district where grown or national, regional or local place name, D. Commercial specifications:
Class, Size expressed by minimum and maximum diameters, Gross/Net weight, Date of packing.
E. Official control mark Official mark of the national official quality certifying agency Additional information if desired by importer VII. PHYTO SANITARY CERTIFICATION The phyto-sanitary certificate is a pre-requisite. It is issued by the National Plant Quarantine Department to the effect that the produce is fit for human consumption. It will neither pose any health risk to human beings nor will transmit any insect pest or disease to the importing country.
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