Pistachios are an integral part of several Indian recipes. However, owing to climatic conditions, its domestic production remains miniscule. India continues to depend on imports to meet its growing domestic demand for this edible nut. In fact, Indian pistachio producers have a long way to go before they can even think of matching domestic consumption. Until then, importers are bound to rule the Indian market.
By Anishaa Kumar | February 2018 Issue | The Dollar Business
Come the festive season, and dry fruit boxes containing the finest almonds, raisins, pistachios and dried figs, find place in stores and homes across the country. Unlike many dry fruits and nuts, which are produced in India, pistachios are mainly imported in. Demand, however, is not limited to the holiday season, pistachio finds usage in Indian cooking and is also enjoyed as a healthy snack due to its high nutritional value. Not surprisingly, the demand for pistachios is not limited to India. According to Global Industry Analysts, global dry fruit and edible nuts markets are expected to reach 4.7 million tonne and 62.6 million tonne, respectively by 2022. A major reason behind the growth in demand is the growing awareness about the nutritional value of dry fruits and nuts.
The global production of pistachios, according to the United States Department of Agriculture (USDA), grew by around 50% in Market Year (MY) 2016-17 over MY2015-16. Also, global exports of pistachios rose by 30% in the same period. According to the October 2017 report, the rise in production of pistachios was most pronounced in US. Iran, which is also one of the larger producers of this popular nut, however, did not see much of a boost to production.
Meanwhile, the domestic demand for the product in India is expected to rise in the coming days. Importers are buying larger volumes of product to keep up with the expected increase in demand. Importers are now sourcing a variety of pistachios – shelled, unshelled, processed, and at times infused with different flavours from different countries. And, with Jammu and Kashmir being the only region suitable for the cultivation of pistachios in India, chances of decline in imports are limited, say importers.
The only way is up
According to the Ministry of Commerce, GoI, data, India has seen a healthy increase in imports of both the shelled and unshelled varieties of pistachio over the last few years. While imports of shelled pistachios have grown by 73.7% between FY2014 and FY2017, imports of unshelled pistachios have increased by 116.2% in the same period. Overall, the imports of pistachios have grown by over 92%, from $62.06 million in FY2012 to $119.50 million in FY2017. When it comes to imports, Iran is India’s largest sourcing market for pistachios. In FY2017, pistachios from Iran accounted for 69% of India’s total pistachio imports, followed by Afghanistan (18%), US (3%) and UAE (1%).
Currently, there are four main varieties of pistachios that are imported from Iran, namely: Fandoghi, Kalleh Ghouchi, Akbari and Ahmad Aghaei. Another popular variety of pistachio is the California Pistachio, which is imported from US. While, overall, Iran is world’s largest exporter of pistachios (shelled and pista kernels), US tops the chart when it comes to export of just shelled pistachios.
The best quality pistachios out of Iran are from the fall harvest and the main demand for pistachios in India is usually between the months of October and February. The demand starts during Diwali, just after autumn, explains Harsh Doshi, CMD of Mahavir International. “The timing is opportune, we can sell our best quality product when demand is high in the market,” he says. “Although, pistachio has some demand all throughout the year, during wedding season and festivals there is higher demand,” he adds.
The profit margins, importers say, are variable. The market price, as is the case with products with seasonal demand, frequently fluctuates. The profit margin, Doshi explains, ranges 3-4%. “The profits are moderate,” he adds. According to Doshi, retail price of pistachios in Indian market hovers around Rs.1,200 per kilogram. However, when it comes to wholesale, the price varies with the variety and quality of the product. Wholesale price starts at around Rs.700 per kilogram and can go up to as high as Rs.1,600 per kilogram for certain varieties.
Doshi further explains, “There is no guarantee that we will make profits in a given quarter. In fact, sometimes we incur huge losses as the market price is way lower than the price at which we imported the product. And storing pistachios is a difficult and expensive option. At the end of the day, margins are usually dependent on your ability to accurately predict the direction of the market. And that comes with experience.”
The choice of India
One of the main reasons behind India’s growing import of pistachios has been low domestic production. Jammu and Kashmir is the only Indian state suitable for cultivation of this nut. Despite the rather restricted domestic production, India has been exporting pistachios in good volumes over the last few years.
Further, Indians have a preference for pistachios from Iran. The size, shape, texture and taste of these pistachios are somethings they are comfortably familiar with. Other varieties, like those from US, were alien to the Indian palate till a few years ago. “There is a difference in taste of pistachios from the two countries. As Indians are used to the taste of Iranian pistachios, the taste of pistachios from US is somewhat alien to us. American pistachios are bigger and have a different finish. And Indians prefer the pinkish colour of the pistachios from Iran over the greenish tint of American pistachios,” says Sanjay Kumar Bansal of Ganesh Kirana Co., a Delhi-based importer of dry fruits and nuts.
Room for More
In India, pistachios are sold in both retail and wholesale markets, either raw or in processed form – salted and flavoured – and the demand for them has only grown over the last few years. And not to say, the growth in consumption has also led to an increase in the number of importers. According to Doshi, the market is constantly changing as importers frequently leave and enter the market for numerous reasons – from losses to a change in business focus. Meanwhile Bansal believes that after an increase in the number of importers the market is now witnessing some sort of a consolidation, and explains, “In the market where I am based, there was a lot of competition earlier, but it has come down now. Over the last five years or so, the institutional sale of dry fruits in the gifting season has increased through Big Bazaar, Reliance and other retailers.
People have also started supplying online.” The proliferation of Internet and the availability of trade data has also helped experienced importers consolidate and trade with ease. For most of the importers, The Dollar Business spoke to, technology has been a blessing. It has helped them in increasing their supplier base and has eased the trading process. Bansal explains, “We now live and work in an Internet-enabled world. If we have ordered goods from one supplier once, for sure another 10 suppliers will touch base with us. They will find out either via the Internet or through the custom house or by word of mouth. They find out who is ordering, what and from where. Previously, we used to procure only from the domestic market. But ever since we started importing, we have been able to negotiate with multiple suppliers.”
Another point that most importers agree on is the benefit of GST. Currently, import of pistachios, attracts around 11% (10% basic duty and 10% social welfare surcharge) in import duties in addition to a 12% GST. Importers say that GST has streamlined the business process for honest traders. “Problems are being faced by those who indulge in tax theft. But for people like us who run an honest business, GST has helped simplify our business. Ours is an inter-state business – we sell across the country. Earlier. there were so many taxes to be paid in each state. But now, everything has become easy,” explains Bansal.
Within India, the state of Jammu and Kashmir is the main sourcing market for pistachios.
There is no doubt that the demand for pistachios will increase in the coming days with the Indian populace becoming ever more health conscious. And with the business environment only improving by each day, pistachio importers are in an enviable position. Not to say, at the moment, the import of these delectable nuts certainly makes good business sense. And if you are still thinking? India’s love for imported pistachios – both sweet and savoury – is here to stay. Need we say more?!
TDB: Which are your main sourcing markets for pistachios?
Harsh Jitendra Doshi (HJD): Most of our imports are from Afghanistan and Iran as they produce pistachios of all sizes and varieties in large quantities. We import the shelled variety as it is in high demand in India. We get the best produce from these regions after autumn, which is great timing as there is high demand for dry fruits during that season.
TDB: Is the process of importing pistachios to India business-friendly?
HJD: All our pistachio imports are certified and thus we have not faced any particular challenges while importing the product. We import pistachios only from companies that we have built a relationship of trust with.
Import of pistachios into India can be both via sea or air. When it is a smaller quantity, we tend to go via the air transportation route and for larger quantities we prefer to use sea transport. Of course, using air transport adds to the costs as it is more expensive compared to the cost of sea transportation, but then this is applicable to almost all products that we import.
TDB: What kind of margins do pistachio importers make?
HJD: For an importer, the profit margin of pistachios varies. It is usually around 3-4%. I would say that the profits margins are moderate. In the retail market, pistachio is sold at around Rs.1,200 per kg. On the wholesale market, the price varies according to the quality and type of the product, etc. It starts at around Rs.700 per kg and at times can go up to Rs.1,600 per kg for some varieties. As it is an agricultural product, there can be issues with the quality and quantity of the product due to crop failure which may impact our margins. But in general, the import of pistachio is actually quite a good business to partake in.
TDB: What is the current scenario of the market? Is this a good time for new players to enter?
HJD: We usually see a rise in demand for dry fruits, including pistachio, from October and this demand lasts all the way till March or April. The entire profit or loss scenario ultimately depends upon the demand for products in these few months. The industry has seen both, new companies coming in and leaving the business. There are as many entries as there are exits. Losses are a part and parcel of the business – people make mistakes in storage, in importing from dishonest suppliers. etc. But, I believe, as the purchasing power of the Indian middle class increases, the demand is going to increase. A decline in demand for pistachios in India in the near future is highly unlikely. So, yes there is space for new pistachio importers.
TDB: What countries do you source pistachios from? Do the taste or texture of pistachios vary with the country?
Sanjay Kumar Bansal (SKB): I usually import from Iran. In India, the demand is for the Iranian variety. But this year the crop from Iran is not of the quality that we have come to expect from them. So, we have been importing from US this year. There is a difference in taste of pistachios from the two countries. As Indians are used to the taste of Iranian pistachios, the taste of pistachios from the US is somewhat alien to us. American pistachios are bigger and have a different finish. Indians prefer the pinkish colour of the pistachios from Iran over the greenish tint of American pistachios.
TDB: How challenging is the import of pistachio? Is good quality product hard to come by?
SKB: As an importer, there are not many challenges. Although in recent years the Indian government has become more strict with regards to imports, it has also become more flexible. The government is open to making changes according to changing requirements of our industry. This has been a boon to businesses in the imports sector.
The issues of quality depend, at the end of the day, on your supplier – whether he is a genuine supplier or a cheat. I myself had an issue a year ago where I received a lower quality product and it resulted in me suffering some losses. An open and honest dialogue with suppliers is the best way to ensure that the delivered product is of the best quality.
TDB: How has the implementation of GST impacted your business?
SKB: Goods and Services Tax (GST) has helped simplify the business. I am very happy that GST is now in place. Tax complications in running a business have, to a certain limit, been reduced. Problems are being faced by those who indulge in tax theft. But for people like us who run an honest business, GST has helped simplify our business. Ours is an inter-state business – we sell across the country. Earlier. there were so many taxes to be paid in each state. But now, everything has become easy.
TDB: How do suppliers contact you? Is the pistachio market well networked?
SKB: We now live and work in an Internet-enabled world. If we have ordered goods from one supplier once, for sure another 10 suppliers will touch base with us. They will find out either via the Internet or through the custom house or by word of mouth. They find out who is ordering, what and from where. This has made finding suppliers very easy. Previously, we used to procure from the domestic market. But ever since we got into imports, we have been able to negotiate with multiple suppliers. The Internet has changed the face of business.