A STUDY ON PACKAGING AND VALUE ADDITION IN TRADITIONAL AND MODERN CONSUMER
RETAIL UNITS: AN ECONOMIC ANALYSIS
Thesis submitted to the
University of Agricultural Sciences, Dharwad in partial fulfillment of the requirement for the
Degree of
MASTER OF BUSINESS ADMINISTRATION
in
AGRIBUSINESS
By PAVITHRA J. P.
DEPARTMENT OF AGRIBUSINESS MANAGEMENT COLLEGE OF AGRICULTURE, DHARWAD UNIVERSITY OF AGRICULTURAL SCIENCES,
DHARWAD-580 005
JULY, 2008
ADVISORY COMMITTEE
Dharwad
(H.S. VIJAY KUMAR)JULY, 2008
MAJOR ADVISOR
Approved by:
Chairman : ______________________
(H.S. VIJAY KUMAR)
Members : 1.____________________
(BASAVARAJ B. BANAKAR)
2.____________________
(S.M. MUNDINAMANI)
3.____________________
(C. MURTHY)
C O N T E N T S
Sl.
No.
Chapter Particulars Page No.
CERTIFICATE
ACKNOWLEDGEMENT LIST OF ABBREVIATIONS LIST OF TABLES
LIST OF FIGURES LIST OF APPENDICES
1 INTRODUCTION
2 REVIEW OF LITERATURE 2.1 Types of packaging materials 2.2 Cost of packaging
2.3 Value addition
2.4 Constraints in packaging and consumer preferences for packed products
3 METHODOLOGY
3.1 Description of the study area 3.2 Sampling design
3.3 Selection of the products 3.4 Nature and sources of data
3.5 Analytical tools and techniques employed
3.6 Definition of terms and concepts used in the study
4 RESULTS
4.1 General information of respondents and selected retail units 4.2 Types of packaging materials
4.3 Cost of packaging 4.4 Value addition
4.5 Constraints in packaging and consumer preferences for packed products
5 DISCUSSION
5.1 General information of respondents and selected retail units 5.2 Types of packaging materials
5.3 Cost of packaging 5.4 Value addition
5.5 Constraints in packaging and consumer preferences for packed products
6 SUMMARY AND POLICY IMPLICATIONS REFERENCES
APPENDICES
LIST OF ABBREVIATIONS
HDPE - High Density Poly Ethylene
Plastic HDPE - Plastic High Density Poly Ethylene
Plastic FB - Plastic Food Basket
Plastic PNP - Plastic Pick N Pay
LIST OF TABLES
Table
No. Title Page
No.
3.1 Salient features of the study area and sample taluks
3.2 Income Classification of consumers in traditional and modern retail outlets
4.1 Distribution of sample units and consumers 4.2 Store possession of retail outlets
4.3 Type of business organisation 4.4 Recurring Costs
4.5 Employment Pattern
4.6 Packaging materials used for different products
4.7 Quantity and value of different packed products in traditional and modern outlets
4.8 Purchase pattern of packaging materials by retailers 4.9 Sources of purchase of packaging materials by retailers 4.10 Mode of purchase of packaging materials by retailers 4.11 Cost of packaging
4.12 Frequency of purchase of packaging materials by retailers 4.13 Agreement regarding purchase of packaging materials by retailers 4.14 Costs incurred in procurement of packaging materials by traditional
and modern retailers
4.15 Opinion of retailers regarding purchase of packaging materials from a particular agency
4.16 Credit facilities given to consumers by retail outlets
4.17 Quantity and value of products procured by traditional and modern retail outlets
4.18 Quantity and value of packed products sold by traditional and modern retail outlets
4.19 Extent of activities undertaken in preparation of the product for sale in retail outlets
Contd…
Table
No. Title Page
No.
4.20 Cost of value addition in retail outlets
4.21 Value addition in retail outlets for selected products 4.22 Labour required to pack the products
4.23 Buying activities of packaging materials by retailers
4.24 Additional concessions given to consumers by retail outlets on purchase of packed products
4.25 Problems faced by retailers in packaging
4.26 Opinion of retailers regarding fast movement of packed products in the market
4.27 Problems faced by traditional and modern retail outlets
4.28 Socio-economic status of the consumers shopping at a retail outlet 4.29 Frequency of purchase of products by consumers
4.30 Opinion of consumers regarding factors influencing preference for packed products
4.31 Problems faced by the consumers in the purchase of packed products
LIST OF FIGURES
Fig.
No. Title Page
No.
1. Map of Karnataka State Showing Dharwad District
2. Map of the Dharwad district showing Study Area
3. Flow chart for processing of milk into pasteurized milk
LIST OF APPENDICES
Appendix
No. Title Page No.
I. Questionnaire for retail outlets
II. Questionnaire for consumers
1. INTRODUCTION
“Packaging may be defined as a general group of activities in the product planning which involves designing and producing the container or wrapper for a product. Packaging obviously is closely related to labelling and branding because a label often appears on the package and the brand is typically on the label”. It is “the art, science and technology of preparing goods for transport and sale” (Briston and Neil, 1986). The specific tasks that packaging performed has been constantly changing. The difference between packing and packaging “is seldom clear-cut”. Usually the term packing is used in a narrow sense and referred to that part of product package which discharges the protection function whereas packaging is used in the broad sense and does both the jobs of product protection and promotion.
Among the major developments in the modern competitive market system, one is packaging. Now, almost everything ranging from primary products such as agricultural products to sophisticated goods like business machines are funneled into the markets in attractive and convenient packages. The twenty first century consumer seems to be not only bothered about the ultimate benefit that product provides, rather he places adequate weightage on the allied benefits such as quality, delivery, installation, warranty, ease of shopping, using convenience, etc. One of the recent innovations that has acquired a key place in consumer decision making is packaging.
Packaging is engaged in the evolution from production orientation to marketing orientation. Packaging performs two functions; product protection and product marketing.
Given the characteristics of production and the mechanical and environmental conditions it encounters in the distribution system, marketers can design a minimum package that can assure its arrival to the consumer in a saleable condition. A minimum package, therefore, is one that protects the products at the lowest possible cost. Packaging cost that exceeds the minimum cost only be justified on the basis of improved marketing performance. While major consumer’s product companies claim packaging as a marketing aid, they place the control of packaging in the hands of purchasing and production departments. Even in the instances involving marketing or top management for design decisions, packaging still remains a production cost.
Newer packaging materials mingle with the old. The type of packaging used includes glass jars and bottles, tin and aluminum bottles, plastic containers, thermoformed containers, lined cartons, wrappers, pouches-pillows and stand-up: all made from individual substrates;
laminates, etc. and jute, canvas and bamboo baskets.
Packaging forms an integral part of the cost structure of a product, since there is hardly any product which can pass on from the producer to the hands of the consumer without being packed or without an outer covering or container. It has been rightly been remarked that “in a successful product, the packaging is as intrinsic as the raw materials that go to make it up” (Briston and Neil, 1986). Thus, packaging is an important consideration which should form a part of any scientific ‘production planning’.
Packaging is considered as an index of civilization. Packaging in India was considered as a luxury due to exorbitant cost of packaging materials. Packaging is a very important link between grower, processor and consumer. It is an important function in the marketing. It is a practice to protect the produce from any damage during storage, transportation and other marketing practices. It is required at every stage of marketing from the producer to the consumer. In recent years, packaging plays an important role in marketing of produce. The good packaging not only facilitates convenience in transportation and storage but also attracts consumer to pay more. The packaging reduces the marketing cost and protects the quality.
General Requirements
The packaging must be of good quality, strong enough to withstand the shocks and loadings normally encountered during transport, including trans-shipment between transport units and warehouses as well as any removal from a pallet or overpack for subsequent manual or mechanical handling. Packagings must be constructed and closed so as to prevent
any loss of contents that might be caused under normal conditions of transport, by vibration, or by changes in temperature, humidity or pressure.
The packaging must consist of three components:
a) a primary receptacle(s);
b) a secondary packaging; and c) a rigid outer packaging.
Primary receptacles must be packed in secondary packagings in such a way that, under normal conditions of transport, they cannot break, be punctured or leak their contents into the secondary packaging. Secondary packagings must be secured in outer packagings with suitable cushioning material. Any leakage of the contents must not compromise the integrity of the cushioning material or of the outer packaging.
Importance of packaging
Packaging as a marketing tool, which is employed in the competitive strategy of the firm has a recent origin. However, with the changes in the market conditions, packaging decisions have moved relatively higher in the hierarchy of importance. The traditional marketing mix which constituted four set of decisions viz., product, price, physical decision and promotion is extended with the inclusion of packaging. The structural changes in the market environment (income, education, awareness, technology, competition) have rendered packaging from being merely a residual decision in the beginning of the twentieth century to a prominent decision today. The facts which necessitated increased emphasis on packaging decisions in the overall competitive strategy of the modern competitive firm are oligopolistic structure of the market, impulsive shopping, self-service stores, customer convenience, effective communication, sales promotion, legal requirement, packaging and product life cycle.
Packaging of foodstuffs is an integral part of the techniques used to extend the shelf- life of food products by different methods of presentation. The protection offered by packaging may be either active or passive. In passive protection, packaging mainly serves as a barrier between the product and the external medium, where as in active protection, packaging is designed for a particular preservation and forms the role other than providing an inert barrier to external condition. The main functions of packaging are:
1. Serves as a container, which protects food from weather.
2. Packaging is a useful media for conveying information concerning the product and its environment.
3. It offers services like spray pack, salt shaker, self heating pack etc., to the consumer.
4. Protects the food from contamination, pilferation and adulteration.
5. Preserves the food and its qualities against deterioration caused by external physical, chemical, or biological agents.
6. In addition to the technical functions of protection, transport and storage of the product, packaging plays substantial role in marketing of the product.
The primary objective of packaging is, of course, to contain a product which is highly essential for any commercial activity. Distribution of product is practically impossible without packaging. Packaging sets the goods into motion in the channel of distribution. Product and packaging are so to say two wheels of progress fitted in the common vehicle of country’s prosperity.
Besides the primary objective of containing, packaging has the following other functions to perform.
1. Preventing adulteration.
2. Preventing pilferage.
3. Preventing shortage in weight.
4. Maintaining quality.
The advantages of packaging are as follows:
1. Production of bulk to retail consumer packs.
2. Conventional to newer systems of packaging.
3. Ensures optimum life to long life.
4. Ease in handling and convenience.
5. Ease in production and distribution systems.
6. Ensures overall growth of the economy.
Indian scenario
The Indian Packaging Industry is estimated at approximately $14.7 B worth and estimated to be growing at 15 per cent annually. The per capita consumption of packaging in India is approximately $15 against a world average of around $100.
The large and growing Indian middle class, along with the growth in organized retail in the country, are driving demand in the packaging industry. Another factor which has provided substantial stimulus to the packaging industry is the rapid growth of exports, which requires superior packaging standards for the international market.
With this, the need for adopting better packaging methods, materials and machinery to ensure quality, has become imperative for Indian players.
Two specific segments that can be identified for opportunities in packaging equipment in the Indian market are un-organized Sector and organized Sector.
The Un-organized Sector represents the larger opportunity, given the increasing quality-consciousness of end customers. The cost of equipment and upgrades hold the key to success in this segment. The Organized Sector, which caters to the packaging requirements of major Food, Pharma and Appliance Industries, are conscious of need to upgrade their manufacturing technology, so as to be able to offer volume, with quality at high speeds, enabling them to address a larger market.
The APEDA (Agricultural and Processed Foods Exports Development Authority) has, in fact, developed new schemes for packaging development which include a 60 per cent subsidy on cost of packaging development (with a ceiling of Rs one lakh per beneficiary), assistance to exporters for packaging development, 30 per cent subsidy to exporters for utilizing packaging developed by APEDA through the Indian Institute of Packaging or others with the ‘Produce of India’ label.
The root cause of the problem in packaging is that the cost of packaging remains very high. While, worldwide the cost of packaging accounts for upto 20 per cent of the cost of the food item, in India it borders anywhere from 10 to 64% of production costs. The high level of intermediation in the Indian food chain also pushes up costs. The other problem is the poor quality of packaging. While there are technologically new forms of packaging available, these are not enough. What exists is more suited to manual handling which is cumbersome and labour intensive. Hence, an effort was made to study the various aspects of packaging and value addition in retail outlets. In addition, consumers study was also undertaken to know the factors influencing preference for packed products in retail outlets. The specific objectives of the study were as follows:
1) To identify the type of packaging material used for different essential products in traditional and modern retail outlets.
2) To study the cost of packaging in different retail outlets for different products.
3) To estimate the value addition by different retail outlets for different products due to packaging.
4) To identify the constraints in packaging at retailers level and consumer preferences for packed products.
Hypothesis
1) Packaging material used in modern retail outlets is of better quality than traditional retail outlets.
2) The per unit cost of packaging is high in traditional retail outlets than modern retail outlets.
3) The value addition is more in modern retail outlets than traditional retail outlets.
4) The retailers of traditional units face more constraints in packaging compared to modern retailers.
Limitations of the study
The study was purely based on the data collected from the owners/executives of the retail outlets who are generally suspicious of the motives of any investigation because of fear of taxation and competition. Therefore, the investigation was confronted with various drawbacks in ascertaining the accurate data. However, greater care was taken to collect the data as accurately as possible. In case of companies having chain of outlets/units, only one unit/outlet data was used to assess the overall objectives of the study.
Presentation of the study
The entire study has been presented in seven chapters. The first chapter is devoted to the introduction of packaging, its importance and the current status of the present study.
The specific objectives of the study as well as limitations of the study have also been indicated.
The second chapter presents a review of literature of the important past studies connected with the objectives of present investigation.
Chapter 3 outlines briefly the main features of the study area and the outlets, nature and sources of data, the tools and techniques of analysis adopted for evaluating the objectives.
Chapter 4 is devoted to the analysis of the data through a variety of tables into which relevant details have been compressed and summarized under appropriate heads and presented in the tables.
Chapter 5 seeks to interpret the results of the study and explains the causal relationships between certain variables and outcome which they produced.
Chapter 6 summarizes the results and suggests policies that emerged from the findings of the study.
Chapter 7, the final chapter lists the references cited while undertaking the research.
2. REVIEW OF LITERATURE
Review of literature gives the guidelines from the past researchers and provides a foundation to the theoretical framework for present investigation. The review of past literature makes the investigator to get an insight into the methods and procedures to be followed.
Since the available literatures relevant to the objectives of the present study are rather limited, the literature on the related subject has been reviewed and highlighted under the following headings.
2.1 Types of packaging materials 2.2 Cost of packaging
2.3 Value addition
2.4 Constraints in packaging and consumer preferences for packed products
2.1 TYPES OF PACKAGING MATERIALS
Anderson and Hardenburg (1959) reported the packaging of strawberries in various types of baskets and film over wraps to improve freshness and shelf life.
In India, cheap and abundantly available natural packaging materials are generally employed in fabrication of packages. Bamboo and Arhar containers of varying sizes, shapes and stacking strengths with paddy straw or green leaves as cushioning materials are used extensively. However, these packages suffer from lack of dimensional stability, poor compression strength and other defects associated with improper weaving and faulty design (Anon, 1965).
Veeragin and Karel (1966) designed a new type of basket with a rectangular top and bottom for packaging mangoes and two compartment basket with a horizontal tray for packaging grapes using CFB boxes with suitable lines. Controlled atmosphere transport containers have also been developed for fresh fruits.
Mantle (1970) said that deep drawn cans are used for packaging of condensed milk, flavoured cream, vegetables, meat products, soups, etc. Lacquered or aluminium hydroxide coated impact extruded cans are commercially used for beer and milk.
Kawada and Hale (1980) reported individual fruit wrapping with low density polyethylene (LDPE) bags then putting it in corrugated fiber board (CFB) boxes at different temperature and relative humidity conditions with Florida marsh grape fruit for further transportation and shipment.
Polyethylene bottles of 1 gallon capacity were found suitable for packing of pickle (Anon., 1980).
Yang et al. (1981) studied the use of polylon nets or polylon cushioning materials in mangoes and banana.
Wardzysnka (1982) described the use of different types of consumer packs for fresh fruits and vegetables viz. Knotless LDPE/HDPE netting (for onions, lemon and oranges);
Plastic wrappers with or without expanded polystyrene tray (for cucumber, cauliflower and cabbage); Moulded pulp trays or cartons (for raspberries and strawberries) etc.
Purvis (1983) reported that 20-40 micron thickness of PE film was suitable for seal packaging of grape fruits.
In 1984 an article has appeared on plastic containers for aseptically packaged foods, retortable plastics bodied cans and development of aseptic systems for packaging of low acid particulate foods (Anon).
Liji et al. (1984) developed low salt pickled vegetables (cabbage) and package was done in polypropylene/PET/Ethylene vinyl acetate bags.
Anon (1985) described aseptic filler (Bowater Type 53), used in Europe suitable for packaging products with a maximum pH of 7.0, of liquid or semi-particulate consistency into units of 250ml. to 1 Litre sizes.
Astrom (1985) said besides the possibility of improving product quality, aseptic packaging makes it possible to use packaging materials other than the traditional metal cans and glass jars. He further states that aseptic packs of paper board laminates and plastic containers in different forms can replace the can/jar and reduce packaging material costs.
Rice (1986) indicated that with improved aseptic processing and packaging of low acid particulate foods, the retort pouch will be more economical than cans.
Krumn (1986) published aspects of carton packaging like environmental concerns and the importance of technological developments in carton packaging, particularly product diversification (to allow aseptic packaging of acid, pasty and particulate products) and package sizes.
Schraut (1987) brought out advantages of using aseptic cartons for packaging UHT products, especially milk products. The author also focussed on innovation potential for development of new products, flavour or ingredients, lower packaging, processing and distribution cost and good consumer acceptance.
Roy and Pal (1993) reported that in the recent years, polymeric films have gained considerable importance as packaging material for various kinds of fruits and vegetables.
Jain and Chauhan (1994) showed that kinnows packed in CFB boxes (10-15 kg.) and transported upto 600 km were reported to have less weight loss and better marketability as compared with gunny bags, bamboo baskets and wooden boxes.
Shaikh and Varadarajan (1995) reported CFB boxes made from kraft paper of cotton plant stalks were suitable for packing of fruits.
Patwardhan (1999) has shown the use of manifold paper in warding off the environmental microbial contamination. He has utilised the manifold paper in development of appropriate aseptic packaging of vegetables.
2.2 COST OF PACKAGING
Wen-Fu-Hsu (1966) worked out marketing costs of fresh sweet potato and found that farmers received only 56.45 per cent of the retail price and remaining 43.55 per cent was being absorbed in the marketing process. The dealers margin at wholesale and retail level adds upto 24.62 per cent of the retail price. The total marketing cost for fresh sweet potato was 47.44 per cent and transportation, packing, loss and shrinkage form 13.2, 1.11 and 4.58 per cent of retail price respectively.
Patil (1975) identified two marketing channels of pomegranate in Ahmednagar district of Maharashtra viz., contract system and sales in market through agents. He observed that about 70.37 per cent of orchard owners sold their fruits on contract basis whereas 29.62 per cent sold in the market through agents. Cost items such as packing, transportation and commission paid to the agents were the main items of expenditure and accounted for about 88 per cent of the total marketing cost in Bombay market. The figure for the same in Rahuri market came to 92 per cent. The overall total marketing cost per quintal in Bombay and Rahuri markets worked out at Rs. 34.35 and Rs. 10.76, respectively.
Dhar et al. (1976) stated that pre-harvest contract system was most common method of apple sale among small and medium orchards and sales through commission agent was more popular among large orchards. The average marketing cost of a kilogram of apple when sold through commission agent at Jammu, Amritsar and Delhi markets came to Rs. 11.88, Rs. 14.58 and Rs. 17.37, respectively. The major items of marketing cost were packing, transportation and commission charges. Further, analysis showed that commission agents accounted for more than 41 per cent of total marketing margins, followed by transportation and handling charges.
Ipte and Borude (1982) while studying the economics of marketing and processing of cashew nut in Ratnagiri/Sindhurdurga districts of Maharashtra state analysed that capital investment in different groups of factories. It was Rs. 18,54,710 of which 12.96% was fixed capital. The important items of fixed capital were investments on building and roasting machinery, while the items of working capital were raw nuts, wages and salaries, fuel, containers, packing and packaging. The capital investment was lowest (Rs. 5,20,611 lakhs) in
small factories and highest (Rs. 71,69,548 lakhs) in large size factories. It was also found that there was positive relationship between the size of the factory and capital invested.
The objectives of a study conducted by Kukde (1990) were to identify the distribution channels for mandarins in Nagpur district, Maharashtra, India, and estimate the marketing costs and margins. Data were obtained from interviews with 20 growers, 12 commission agents, and 12 retailers during 1996-97 and 1997-98. Secondary data on arrivals and prices were also obtained from APMC records for the period 1991/92-1996/97. Transport cost had the largest share of total marketing costs, followed by the cost of packaging materials.
Producers' marketing margins were only 36.89 and 24.76 paisa in Nagpur and Delhi markets, respectively. The annual requirement of wooden boxes for packing of just 50% of Nagpur mandarin was estimated to be 10 million.
Koujalagi and Kunnal (1991) made an attempt to identify the marketing channels and estimated the marketing costs of pomegranate in Bijapur district. The total marketing cost incurred by pomegranate producer seller was Rs. 71.94 per quintal. The four items, namely, commission, transportation, packing material and harvesting together formed 95.88 per cent of total marketing cost. The other items, namely, labour charges and miscellaneous expenditure constituted the remaining part of marketing cost.
Subramanian and Sudha (1992) worked out the cost and returns associated with one tonne finished product of tomato (ketch up). It was observed that benefit cost ratio was around 2.0 showing that processing was profitable. Raw materials and packing were the two main items accounting for 67 per cent of the total variable cost of processing of one tonne (Rs. 93.46). The raw materials i.e., fresh tomatoes; needed for producing 32.42 tonnes of finished products was estimated to be 130 tonnes.
Amrutha (1994) in her study on economics of processing paddy in Chitradurga and Dharwad districts observed that the total cost of procurement incurred by an average size rice mill was Rs. 20.83 per quintal, of which Rs. 10.54 (50.6 %) was spent on transportation, which was found to be maximum. While amount spent on gunny bag [Rs. 2.46 (11.81 %)] was found to be minimum. The market fee and commission accounted for 37.59 per cent of the total cost.
A rupee invested in the packaging materials for tomato cvs. Rashmi and LIBH 230 always resulted in more than Rs 5 saving due to avoidance of spoilage. Further the quality of fruit packed was superior due to avoidance of pressure injuries (Krishna, 1995).
Balasubramanian and Rama (1996) in their study on pricing and transaction trend of raw cashewnut in India observed that the cost of production of kernel per quintal of cashewnut was maximum on raw cashewnut (70%), followed by processing labour (10.50%), purchase tax (5%), handling charges (5%) and packing material (4.50%). The minor item of cost was transportation, fuel, factory overhead, administrative overhead and depreciation (0.10% each)
Balasubramanian and Prema (1996) in their study on processing and trading of cashew nuts in India observed that the total processing and raw material costs accounted for about 70 per cent, labour charges 10.5 per cent, purchase taxes 5 per cent, freight and handling charges 5 per cent, packing cost 4.5 per cent and remaining 5 per cent was contributed by costs on power, fuel, depreciation and overheads all put together.
Singh (1998) studied production and marketing of food grains in tribal region of Chattisgarh. He reported that in the case of gunny bags, packing cost worked out to Rs. 28.27 per quintal. The packaging cost per quintal for mud bins was Rs. 3.10. The storage cost per quintal per month for paddy, maize, blackgram, wheat and gram were Rs. 4.73, Rs. 6.23, Rs.
2.80, Rs. 7.30 and Rs. 3.40, respectively. The storage loss of paddy, maize and wheat in Chattisgarh was observed to be 6.52 per cent, 10.28 per cent and 16.28 per cent of the total production. The monetary value of total storage loss was Rs. 3635 in the study area of Chattisgarh. It was observed that gunny bags stored in alone suffered the maximum as compared to mud bins. Insects, pests and diseases caused maximum losses irrespective of the commodity and type of storage system.
Anonymous (2006) reported that, in USA food retailing, labor was the largest single marketing cost, accounting for half the industry’s expenses beyond the farm. Food retailers
employ more than 3.5 million workers. The industry’s next highest costs were for packaging (8.0 per cent), and transportation and energy (combined 7.5 per cent). Recent trends such as high energy costs and the rising demand for more convenient packaging have increased all these expenses.
2.3 VALUE ADDITION
Processing adds value to the commodity. It reduces the perishability of the product, increases the shelf-life and makes it available for ready consumption. It also makes it possible to recover valuable by-products. Processed products yield better returns to producers. With this view, an effort has been made to review the related literature.
Shukla and Pandey (1966) analysed the costs and returns in processing of mustard and rapeseed in Hissar. The profit margin was observed as Rs. 3.43 per quintal in the case of small sized units with traditional techniques. Profit per quintal was Rs. 4.86 in the case of medium size units with modern techniques and Rs. 7.02 per quintal in the case of large sized units with improved techniques. It is concluded that there was considerable scope to reduce the unit cost of processing by adopting improved technology which would eventually increase the operational efficiency and benefit the consumers.
Kahlon and Singh (1968) studied the marketing of groundnut in Punjab and found that profit margins per quintal for decortication, drying and processing was Rs. 18.69, Rs. 3.66 and Rs. 3.57 respectively and also indicated that the profit margins of the oil millers could be increased by adopting modern technology by the industry.
Singh and Sidhu (1974) studied the economics of scale in groundnut processing industry in Punjab and found that the profit margin per quintal of groundnut processing was Rs. 31.16, Rs. 24.85 and Rs. 23.33 in large, medium and small mills, respectively. Further, they observed that economies of scale in groundnut processing industry and economics of each mill depend on the nature of cost and labour engaged in them.
Several workers (Seideman et al., 1982; Smolinska et al., 1988; Kondaiah et al., 1992) have attempted to develop value-added, comminuted products from spent hen meat and edible by-products, such as skin, gizzard and heart (SGH) to realize higher economic returns from spent layers.
Geeta et al. (1988) studied value addition to cotton yarns. The study revealed that, the production of agricultural products and cost involved for the production and profit earned for the products. The agricultural products and their cost was hide hagga (Rs. 29), Mugadan (Rs. 10), Kari hangada (Rs. 12), Kalli (Rs. 16), Barkol (Rs. 7), Gonde (Rs. 11), Hane gejje (Rs. 30), Jatagi (Rs. 17) and Neluva (Rs. 28). In these products, the maximum profit was for Gonde (36%), followed by Kari hangada (25%), Kalli (25%) and Neluvu (25%) and minimum was for Barkol (14%).
Acharya and Agarwal (1989) in their study on Agro-Processing observed that the profit margin per quintal of rapeseed and mustard oil was Rs. 19, Rs. 21 and Rs. 22 in six bolt expellers, nine and nine bolt expellers and oil mills respectively. They also found that the profit margins of dal mill owners was Rs. 22, Rs. 13 and Rs. 27 per quintal of gram, moth and moong respectively.
Srinivas et al. (1989) studied the economics of three types of oil processing units and found that the returns per quintal of oil were the highest in the case of expellers (Rs. 16.55) followed by oil mills (Rs. 11.05) and Kohan (Rs. 9.49).
Sinha (1990) calculated the value added at various stages of production of printed handloom silk saree at 1983-84 prices. The total showed that roughly 30 per cent of the value of printed silk saree accrued at the primary cocoon production stage. The reeling of silk adds seven per cent, 3.6 per cent for twisting and 12.5 per cent accrued to the weaver. Printing charges accounted for about 21.7 per cent. Thus the total production cost accounted for around 75 per cent of the final value with 25 per cent accruing to the trader.
Singh et al. (1994) based on the economics of marketing and processing of pulses in Bundelkhand region (Uttar Pradesh) revealed that the average cost of processing per quintal arhar/gram/lentil including cost of raw material worked out to Rs. 800.61. The processing cost
of per quintal arhar, gram and lentil dals amounted to Rs. 831.67, Rs. 822.47 and Rs. 752.05, respectively.
Maurya et al. (1995) in their study on marketing of anola and its products in Varanasi district indicated that, the per quintal processing cost of morabba, pickle and chutney amounted to Rs. 2198.80, Rs. 1750.40 and Rs. 3233.80, respectively. The highest processing cost was for anola chutney and the lowest for anola pickle.
Mattigattti et al. (1997) studied the value addition in silk. They concluded that, of all the factors that contributed to the value addition, labour is the major factor contributing 52.6 per cent to value addition. The chemical inputs accounted for 30.9 per cent of the value addition in rearing. In the post-cocoon operations, the contribution of investments to the value addition were higher for twisting (32.1%) and weaving (21.9%) operations. Silk reeling and dying processes were characterized by the utilization of labour and electricity truly for value addition in their process.
Beverland (2001) analysed the level of brand awareness within the New Zealand market for ZESPRI kiwi fruit, the effectiveness of this branding strategy employed by kiwi fruit New Zealand since it creates value to this fruit. The implications of this findings for agribusiness in general using the data collected from surveys of kiwi fruit consumers (n=106) outside three major super market chains in Auckland, New Zealand. The results suggested that the level of brand awareness for ZESPRI is low among consumers. It is indicated that brand awareness could be increased through a relationship marketing programme involving targeted marketing and supply chain management.
Mahesh and Nagaraja (2002) reported that the value addition of cashew (Anacardium occidentale) kernel baby bits (CKBB) was attempted by coating with cane sugar, honey and salt. Optimum coating occurs at 100 degrees C for 5 minutes at 70 per cent concentration for cane sugar and honey, and 5 per cent for salt. Sweetened (70%) and vanillin (0.1%) flavoured CKBB are the most preferred. De-fatting of CKBB enhances the per cent coating. Coating of cashew kernels of different grades with cane sugar at 70% is dependent on the surface area.
Cashew apple juice could be coated on the CKBB. Acceptability of cashew apple juice coated baby bits (BB) improves with the addition of cane sugar at 70% concentration. Permitted colours and cane sugar compete with each other during coating.
Madhuri and Kamini Devi (2003) found that in watermelon, the rind constituted 33%
of the whole fruit weight. Value added preserved products like pickles, tutti fruity, vadiyams and cheese were prepared using the white portion of watermelon rind. The quality of products in terms of physical parameters was evaluated. All products were subjected to sensory evaluation test using a panel of 20 judges. Results showed that mean sensory scores for product attributes were high. There was no change in mean scores after one month storage.
Subasinghe (2003) studied the different innovations used by food processors to add value to aquaculture products, mainly, shrimps, in order to survive in a highly competitive market environment. Some of these innovations were focused on the packaging and presentation of the shrimps, whereas others focused on pre-processing/processing, such as peeling, preparation of breaded products, application of batters, and production of other shrimp-based products.
Arora et al. (2004) found that vegetable washing is an important primary process unit operation for value addition of the produce at farm level. Washing is used not only to remove field soil, dust, pesticides, but also the surface microbial load. Carrots, potatoes and spinach were washed mechanically in a rotary vegetable washing machine at varying speed and time and then evaluated for their quality. The microbiological washing efficiency, which is calculated by observing the total viable count of the surface of the vegetables before and after washing ranged between 96.5-99.8% as compared to recommended 80% indicating the acceptability of the vegetable washing machine.
2.4 CONSTRAINTS IN PACKAGING AND CONSUMER PREFERENCES FOR PACKED PRODUCTS
Kaurshal et al. (1976) found that educational level significantly influenced the brand loyalties in use of washing soaps. Educated people based their loyalties on easy lather formation, convenience in handling and soaps not affecting skin, while less educated people
on the basis of price, attractive packaging and early availability in the market. Sellers can adopt suitable marketing strategies dividing high quality products among educated and cheap products among illiterate class.
Patel (1980) studied the preference for milk in Madras city with a sample size of 300 respondents. Nearly 77 per cent of the respondents preferred standardized milk with 4.5 fat content. On an average, 61 per cent of the respondents preferred milk in 500 ml sachets followed by 19 per cent for 200 ml sachets and the remaining liked 100 ml sachets.
Haripuram (1986) studied the factors influencing the purchase of biscuits for a sample of 470 respondents. The study revealed that taste was given the highest preference, followed by freshness, crisp bite, brand name, variety, price and availability. It was found that consumers preferred packed biscuits to loose ones and small pack size to big packs. Further, the decision makers and buyers of biscuits were observed to be elders even though the children considerably influenced the decision making process.
Gluckman (1986) studied the factors influencing the consumption and preference for wine. The explicit factors identified were, familiarity with the brand name, price of wine, quality or the mouthy feel of the liquid. Taste with regard to its sweetness or dryness and the suitability for all tastes. Some of the implicit factors identified through extensive questioning were colour and appearance. Most consumers secured to prefer white wine to red wine.
Packaging, appearance, colour, ornateness, use of foreign language and graphics were taken as important clues for quality and price. Consumers preferred French or German made wines to Spanish or Yugoslavian wines.
Steenkamp (1986) studied consumer preference for ham using conjoint analysis in Netherlands. A nation-wide sample of 250 respondents was drawn. Each respondent was administered with a set of 16 cards with different levels of attributes. The attributes considered were brand name, packaging, store and price. The relative importances of these attributes were 29.3, 43.8, 9.9 and 16.9 per cent, respectively. It was found that packaging was considered to be the most important attribute influencing consumer decision.
Chaudhary et al. (1987) reported that the total number of fruit and vegetable processing units in India were around 1300 with an installed capacity of 3 lakh tonnes and an estimated production of 1.45 lakh tonnes. They noticed an increased capacity utilization from 25 to 30 per cent in 1970 to 40 per cent in 1982. Factors like high cost of packaging material, high imposition of import duty and lack of research efforts for modernization of packaging and other techniques were found to be affecting the industry’s production and exports.
Singh (1989) studied the consumer perception of (i) milk products manufactured by organized sectors and compared with that of (ii) milk products manufactured by unorganized sectors in India. (i) comprises industrial-scale manufacture and products manufactured by state corporations, cooperatives and joint stock companies. (ii) comprises small-scale manufacture and home-made products. Data was collected from 394 households in Chandigarh. Milk products from (i) were perceived to be more ‘reliable in quality’,
‘hygienically-prepared’, ‘cleanly-packaged’, ‘delicious in taste’ and ‘offering good value for money’ compared with milk products from (ii). Perception of moisture content, digestibility, nutritional value and flavour were rated similarly for (i) and (ii). Price was perceived to be higher on (i) than (ii). Differences in income and education did not influence perception.
Shah (1990) reported that higher price of CFB boxes Vis - a - Vis conventional wooden container and fear of loss of fruit due to collapsing of CFB boxes were considered as main hurdles in popularizing CFB boxes for orange packing.
Shanmugasundaram (1990) studied about soft drink preference in Vellore town of north Arcot district in Tamilnadu. The study revealed that, the most preferred soft drink among respondents as Gold spot (26%) followed by Limca (24.80%). It was found that taste was the main factor for preference of particular brand and among the media, television played a vital role in influencing consumer to go for particular brand; convenience in carrying tetra pack were most preferred one.
Richardson and Shephard (1994) examined the factors influencing in the choice of diet. The study revealed that 28.3 per cent of the factors influencing the meat consumption were healthiness, taste, concerns over additives and the trust in the purchase stores used. It
was also found that the food package labels were an influential source of meat related information.
Gerhardy and Ness (1995) employed conjoint analysis to know the consumer preference for eggs in United Kingdom. A sample of 160 respondents was interviewed in five locations. The average relative importance given for production method was 30.4, price and origin were 25.6 and 25.06 per cent, respectively. Freshness indicators (egg laid date, packed date, etc.) received an importance of 18.9 per cent.
Sharma et al. (1995) in their study on marketing of vegetables in Himachal Pradesh reported that costly wooden boxes, time consuming manual grading, distant markets, high transportation charges, malpractices in the market and lack of market information as the major post harvest problems faced by the growers.
Singh et al. (1995) considered factors, namely quality, availability, convenient pack size, flavour, colour, freshness and mode of payment to study the preference for particular source of milk, namely, rural milk vendors, privately owned city dairies and dairy factories.
About 70 per cent of the respondents preferred milk supplied by city dairies. The least preferred was that sold by dairy factories.
Kundu et al. (1997) in their study on India’s floriculture exports revealed that the constraints faced in the global market by India is due to inadequate infrastructure for the production of floral crops for export. This leads to unnecessary surplus which would have been exported. Lack of appropriate planting materials, production technology, basic inputs like standard containers, quality packing materials etc. were the major problems. Domestic market is unorganized and there are no established marketing channels.
Ashalatha (1998) studied the factors influencing the performance of BAMUL milk for a sample of 100 respondents. The study revealed that the factors such as door delivery, clean packing, quality, hygienic preparation, time saving, reliability, good value for money, freshness and desired flavour were important in the similar order in influencing the decision of buyers for BAMUL milk.
Sehrawat et al. (1999) conducted a study to assess the problems encountered by entrepreneurs to facilitate setting up of sustainable export units and to find out the relationship between entrepreneurs independent variables with problems encountered. The study revealed that very serious marketing problems encountered by entrepreneur were cheaper/superior competitive substitute, inadequate availability of export information, high cost of package while unfamiliarity with export activities, identification of mega markets/potential markets for exports, lack of market intelligence, quality specification, lack of sophisticated technology of packaging for export, competition from already established and larger units, cumbersome procedure of import and export were serious problems.
Sanjay and Abdul (2002) observed that purchasing decision of branded rice was done by housewives and retailers were the main source of information. Most of the consumers preferred to buy 10 kg packs rather than 25 kg. The quality and image of brand were ranked as major factors for brand preference in purchasing of branded rice.
3. METHODOLOGY
This chapter presents the climatic and economic features of the study area, nature and sources of data collected, analytical tools and techniques employed to evaluate the objectives of the present study. The details are presented under the following headings.
3.1 Description of the study area 3.2 Sampling design
3.3 Selection of the products 3.4 Nature and sources of data
3.5 Analytical tools and techniques employed
3.6 Definition of terms and concepts used in the study
3.1 DESCRIPTION OF THE STUDY AREA
The state of Karnataka is situated on a tableland where the Western and Eastern Ghat ranges converge into the Nilgiri hill complex, and is confined roughly within 11.5 degree North and 18.5 degree North latitudes and 74 degree East and 78.5 degree East longitudes.
The State is bounded by Maharashtra and Goa States in the North and North-West; by the Arabian Sea in the West; by Kerala and Tamil Nadu States in the South and by Andhra Pradesh in the East. The State extends to about 750 km from North to South and about 400 km from East to West and covers an area of about 1,91,791 sq.km. It accounts for 5.83 per cent of the total area of the country (32.88 lakh sq.km) and ranks eighth among the states of the country in terms of both geographical area (1.92 lakh kms) and population of 5.27 crore (2001 Census).
Karnataka is also one of the leading states in organized retailing in India as there are more than ten organized retailers (firms) with more than 100 outlets including Metro AG operating in Bangalore city alone due to increasing urbanization and expanding service sectors like software, banking, insurance and Business Process Outsourcing (BPO), which has taken a metropolitan city status more recently has led to increased income of the consumers. Apart from Bangalore, cities such as Hubli-Dharwad in Karnataka are also growing rapidly in terms of urbanization, income and organized retailing with local food marketers as they are converting unorganized retail outlets into organized form because of strong demand for convenience products; and better educated consumers concerned about health, nutrition, food safety and the environment. Since, majority of modern retailing formats like supermarkets are existing in these cities only these two cities in Karnataka were purposively selected for the study.
3.1.1 Location
Dharwad district is situated in the Northern part of Karnataka state at 140 31’ N latitude and 74028’ E longitudes. The district comes under the transition zone. It is bounded by Belgaum in the north, Haveri in the south, from north east to south east by Gadag district.
The District is divided into 3 belts geographically, viz; Malnad, transition and dry regions.
Malaprabha is the only major river of the district. It has 5 talukas and 403 villages. Dharwad and Hubli talukas fall in the western part of Dharwad district. Dharwad and Hubli talukas are surrounded by Kalaghatagi, Kundgol and Navalgund talukas of Dharwad district and Gadag taluka of Gadag district.
Hubballi-Dharwad, formerly 'Hubli-Dharwad', are twin cities in the state of Karnataka in India. It is the second-largest conurbation in Karnataka, after Bangalore. Dharwad is the administrative headquarters of Dharwad District.
Hubli City, situated about 20 km south-east of Dharwad, is the commercial centre and business hub of North Karnataka. The area is 200.23 square kilometers and the elevation is 670.75 m from mean sea level. The population was 15 lakhs (2008) and density was 4,292 /km² (http://en.wikipedia.org). Cotton and peanuts (called groundnuts locally) are grown aplenty in the surrounding rural areas and Hubli is a major trading center for both commodities. Sea food from Karwar, a coastal town 165 km away, is packed and shipped
Fig. 3.1: Map of Karnataka State Showing Dharwad District
Fig. 3.2: Map of Dharwad district showing Study Area
from Hubli. It is also an important city for the Indian Railways, being the headquarters for South Western Railway Zone and the Hubli Division. It also has a century-old wagon workshop.
The population of the twin cities is 786,000, as per 2001 census and it is estimated more than 900,000 now. Hubli-Dharwad's population increased 22.99% between 1981 and 1991, from 527,108 to 648,298, and by 21.2% between 1991 and 2001. The municipality covers 191 km². Hubli-Dharwad is located 425 km northwest of Bangalore, on the National Highway number 4 between Bangalore and Pune in Maharashtra. The City is governed by the Hubli-Dharwad Municipal Corporation, having an elected council. The climate of the city is extremely good throughout the year and especially Dharwad is known for its salubrious climate. The M.S.L. of Hubli is 626.97 meters and that of Dharwad is 696.97 meters. The average yearly rainfall is 838mm (http://en.wikipedia.org).
Hubli is an important industrial centre, with more than 1000 allied small and medium industries already established. There are machine tools industries, electrical, steel furnitures, food products, rubber and leather industries and tanning industries. The city is situated in the dividing line between Malenadu and planes. The Malenadu is well known for its forests and forest based industries and the other three side region are known for their agricultural products like cotton, groundnut, oilseeds, manganese ore and granite stones. The value of
agricultural products coming into Hubli market runs into multiple crores. The Cotton Market of Hubli is one among the five biggest markets in India.
Hubli is well connected by road, rail and air. NWKRTC (North West Karnataka Road Transport Corporation) is a state run corporation headquarted at Gokul Road, Hubli. There is excellent inter-city transportation between Hubli and Dharwad as NWKRTC and Bendre Nagara Sarige (a consortium of private bus-owners) healthily compete to cater to the large number of commuters between Hubli and Dharwad daily. Bus services from the twin-cities exist to every part of Karnataka and neighbouring states and other popular destinations.
There are many private bus operators who render services for overnight travel between Hubli and Bangalore, Mangalore, Pune, Mumbai.
3.1.2 Geographic and Demographic Features
The salient geographic and demographic features of the study area and the sample talukas are presented in Table 3.1. Dharwad district has an area of 427329 ha of which Dharwad taluka has an area of 111788 ha and Hubli taluka has an area of 73707 ha. The total population of Dharwad district as per 2001 census was 16.05 lakhs and of which Dharwad talukas accounted for 2.19 lakhs and Hubli for 1.28 lakhs. The density of population of Dharwad district as per 2001 census was 377 per sq. km as against 219 and 207 per sq.
km for Dharwad and Hubli talukas respectively.
The twin cities of Hubli-Dharwad are located at a distance of around 430 kms from Bangalore, the capital of Karnataka state. The climate is hot and wet during summer and rainy seasons and pleasant during winter. Dharwad is a quiet, pleasant and fast growing city in the northern part of Karnataka. Together with Hubli, which is a city twenty-two kilometers away, Dharwad forms a twin city.
Hubli-Dharwad is known for its prestigious educational institutions. Dharwad is perhaps best known for its "Pedhas", a sweet made out of milk, and is a must-buy for any tourist visiting the city. Today, Dharwad has grown beyond its borders, with industries dotting both its northern and southern boundaries. In years ahead, it promises to be a beehive of commercial activity. The location of the city on the National Highway number 4 makes it equidistant from two of the most industrialised centers in the country - Bangalore, the capital of Karnataka state and Pune the 2nd most industrialised city in Maharashtra. The retail sector in these cities is characterized by large traditional forms of independently owned small business which occupied a significant market share. Recently, Hubli based BDK Group of Companies entered to modern retailing by opening two supermarkets outlets (in 2001) at Hubli and few local retailers are also modernizing their stores in the form of supermarkets.
3.2 SAMPLING DESIGN
To fulfill the objectives related to the retail outlet operations of the study, a multistage random sampling technique was employed. In the initial stage, two talukas, namely Hubli and Dharwad, were purposively selected from Dharwad district for the study, since majority of modern retailing formats like supermarkets are existing in these cities and it is one of the rapidly growing cities in terms of urbanization, income and organized retailing with local food marketers as they are converting unorganized retail outlets into organized form because of strong demand for convenience products; and better educated consumers concerned about health, nutrition, food safety, and the environment.
At the second stage, 2 modern outlets and 5 traditional outlets from Hubli city and 10 traditional outlets from Dharwad were selected, so that the total sample size selected for the study was 17.
Since milk is not packed at retail level, to study the packaging and value addition aspects of milk, 3 production plants from modern category, 1 each from Dharwad, Uttar Kannada and Belgaum district and 3 plants from traditional category; 2 from Dharwad and 1 from Hubli were selected. For studying the factors influencing the consumers to purchase packed products, 30 consumers for each outlet in modern category and 4 consumers for each outlet in traditional category were selected randomly, making the total sample size of consumers to 120.The study was conducted during the month of March-April 2008.
Table 3.1. Salient features of the study area and sample taluks
Sl.
No.
Particulars Dharwad district Dharwad Taluk Hubli Taluk
1. Geographical area
(in hectares) 427329 111788
(26.16)
73707 (17.25) 2. No. of Inhabited village
372 110
(29.57)
58 (15.59) 3. Total Population
(2001 census)
1604253 218961
(13.65)
128380 (8.00)
4. Rural population 722336 202671
(28.06)
128380 (17.77)
5. Urban population 881917 13264
(1.50)
16290 (1.85)
6. Male population 823204 112239
(13.63)
66000 (8.02)
7. Female population 781049 106722
(13.66)
62380 (7.99) 8. Population density
(per sq.km)
377 219 207
9. Normal rainfall(mm) 772 838 693
10. Actual rainfall 713 947 693
Note : Figures in parenthesis indicate percentage to the district total.
Source : Dharwad district at a glance, 2006-07, District Statistical Office, Dharwad
3.3 SELECTION OF PRODUCTS
Since it is difficult to study the overall operations in all the products, only two products from each agricultural commodity groups like rice and wheat in cereals, tur and greengram in pulses, cashew and raisins in processed dry products, milk and pickles in processed wet products and finally vermicelli and papad in ready to eat products were selected. Thinking to include items from each agriculture commodity groups two items from each group were selected.
3.4 NATURE AND SOURCES OF DATA
The detailed information required for the study was collected from both primary and secondary sources in order to accomplish various objectives of the study and are illustrated with their heads as follows.
A) PRIMARY DATA
Primary data were collected with the help of well structured and pretested schedules.
Data were collected from the respective owners/managers of retail outlets and production plants.
The primary data with respect to store possession of retail outlets, type of business organisation, recurring costs and employment pattern were collected to know the general information regarding the retail outlets. The data on packaging materials used for different products was collected to know the type of material used for packaging the products in retail outlets. To know the economics of packaging, data on quantity and value of different packed products, purchase pattern of packaging materials; their source and mode of purchase, cost of packaging, frequency of purchase of packaging materials, agreement regarding purchase of packaging materials, costs incurred in procurement of packaging materials, opinion of retailers regarding purchase of packaging materials from a particular agency and credit facilities given to consumers by retail outlets were collected.
The information on stages involved in processing, cost incurred in processing and the value addition per unit of each of the selected product due to processing and packaging in different categories such as cereals, pulses, processed dry and wet products adopted by these outlets were collected from the concerned authorities of retail outlets to evaluate management of processing. Similarly, the data on problems faced by the retailers in packaging, their opinion regarding fast movement of packed products in the market and problems faced by retail outlets, were also collected from the concerned authorities of these selected outlets.
The data from 120 consumers (60 each from selected traditional and modern outlets) pertaining to (i) general information from individual respondents on their socio-economic factors like age, education, occupation, income, family size, family type, religion etc., (ii) frequency of purchase of products, (iii) opinion regarding factors influencing preference for packed products and finally (vii) problems faced in the purchase of packed products were collected from the randomly selected consumers from each retail outlet using pre-tested well structured schedule through personal interview method.
B) SECONDARY DATA
The secondary data on area, population and rainfall about the study area were collected from District Statistical Office for the year 2006-07.
3.5 ANALYTICAL TOOLS AND TECHNIQUES EMPLOYED
The data collected were presented in tabular form to facilitate easy comparisons.
Tabular analysis was used to workout averages and percentages for the types of packaging materials, cost of packaging, value addition and problems faced by the retailers and various socio-economic characteristics of the sample respondents like age, educational status, occupation and family type. Also, consumer preference for packed products, problems faced in the purchase of packed products were presented in the form of tabular analysis. The data were summarized with the help of statistical tools like averages and percentages to obtain meaningful inferences.
The sample respondents, the consumers from retail outlets, were post classified into different income groups. Income classification was made based on the monthly income. The mean and standard deviation was calculated first. The mean for traditional and modern consumers was 11858.33 and 24150 respectively. The standard deviation for traditional and modern consumers was 1683.57 and 2244.52, respectively. Then the income classification was made by subtracting one standard deviation from mean and categorized as low income group (IG1) and the value above IG1 to mean was considered as second Income Group (IG2).
The mean was added with one standard deviation and the value above IG2 and mean with one standard deviation was categorized as high Income Group (IG3) and finally the value greater than IG3 was categorized as very high Income Group (IG4). Likewise the respondents were categorized into four income groups and rounded off to nearest hundred rupees. The income classification for traditional and modern consumers was made separately, because of wide gap in their income levels. The details of the classification is presented in Table 3.2.
3.6 DEFINITION OF TERMS AND CONCEPTS USED IN THE STUDY
3.6.1 Packaging
a. Packaging: Is a part of packing, which means placing the goods in small packages like bags, boxes or packets for sale to the ultimate consumers.
b.Retailers: Retailers buy goods from wholesalers and sell them to the consumers in small quantities.
c. Salaries: The wages paid to the permanent staff of the outlet/production plant as salaries were considered under this. In addition, bonus and provident fund towards the staff are also included.
3.6.2 Cost of packaging
a. Cost of packaging: It was computed by adding the items of labour charges and packaging materials charges per kg/litre of quantity packed.
b.Monthly costs incurred in procurement of packaging materials: It was computed by adding the items of transport cost to the value of packaging materials procured.
3.6.3 Processing/value addition
a. Processing: may be defined as a deliberate activity which changes the form of commodity. It converts farm products into a more usable form and with added values.
b. Cost of milk processing: The cost of processing of milk was calculated by covering all dairy expenses and others which are considered as the overheads. Cost of processing per unit was obtained by dividing the total cost by quantity of milk processed.
c. Processing of milk: Milk processing does not only mean change in the form of milk, but also a heat treatment followed by cooling to increase the self-life of milk. In other words, processing refers to conversion of raw milk into pasteurized milk. The said process is detailed below.
The milk received from different places is first weighed and then chilled. After chilling, the milk will be sent to cream separator; the cream and skim milk will be obtained separately.
The skimmed milk powder is then mixed with whole milk in order to obtain a desired level of fat and SNF. Then homogenization will be done to equalize distribution of SNF and fat in complete batch of milk. Followed by pasteurization, heating will be done at 720C for 15 seconds then chilled to less than 50C. The chilled milk will then be packed in 200 ml, half litre and one litre sachets. The packed milk will be stored at cold storage at 50C. The Fig. 3.3 depicts the flow chart for processing the milk.
3.6.4 Stages of processing/value addition in retail outlets
a. Cleaning: It refers to the removal of particles such as pieces of trash, stones, clods, removal of foreign materials, other products, etc larger in size than desirable products from threshed products lot.
Table 3.2: Income Classification of consumers in traditional and modern retail outlets
Income levels Income groups (IG)
Traditional Modern
IG1 Upto Rs. 10000 Upto Rs. 22000
IG2 Rs. 10001 to 12000 Rs. 22001 to 24000
IG3 Rs. 12001 to 14000 Rs. 24001 to 27000
IG4 Above Rs. 14000 Above Rs. 27000
b. Chemical treatment: It refers to the application of boric acid, to products so as to protect them from storage insects.
c. Packaging: It refers to filling of products in bags/polythene bags to an exact weight and sealing the bags.
d. Labelling: It refers to attaching labels, certificates, tags on the products bags.
3.6.5 Value addition due to processing, packaging and retailing
It was calculated by subtracting the sum of purchase value of one kg of any product and cost of packaging from the sale price.
3.6.6 Percentage value added
It was calculated by dividing the value added due to processing, packaging and retailing by purchase price and expressing it in percentage.
3.6.7 Cost of processing/value addition
This was computed by adding the costs incurred on power, supervision charges during processing, chemical treatment, packaging materials (cloth/polythene bag, tags, labels, gunny bags) and labour charges.
Fig. 3.3: Flow chart for processing of milk into pasteurized milk
