8 October 2020

Key insights

India – The Foreign Ministers of India, Australia, US and Japan joined a QUAD ministerial meeting in Tokyo where they discussed deepening cooperation in the Indo-Pacific region. This arrangement strengthens Australia’s relationship with India on a number of issues including supply chain resilience. Indian companies importing multiple goods – from pharmaceutical ingredients to critical minerals – are keen to diversify supply chains. Austrade is scoping demand for critical minerals in India and initial reactions are positive.

Bangladesh – Australia has recently exported containers of pulses and fruits to Bangladesh. Austrade is monitoring these shipments, which are being cleared as per the scheduled time. This implies that backlogs at Chittagong have now largely cleared. Meanwhile, the Asian Development Bank (ADB) projects a strong economic recovery in the 2020–21 fiscal year, with GDP expected to grow by 6.8%.

Sri Lanka – The government has delayed re-opening Colombo international airport indefinitely for incoming leisure and business travelers, however cargo and repatriation flights are operating including for Sydney. Fresh produce and other cargo is arriving from Australia to Colombo and other regional markets.

Market opportunities

India

Food & Agriculture

  • According to industry estimates, India imported Manuka honey worth A$760,000 last year. At least six brands are now available on shelves and sales are expected to grow 18% this year. Austrade’s strategy to promote premium processed food involves actively working with retailers, importers and Australian exporters to increase the number of Australian food products in India.
  • Australian snack makers are expanding onto online platforms. The Muesli brand Carman’s is now selling via Amazon and Flipkart, having launched in February. The breakfast cereal market in India is estimated at A$320m, growing at a CAGR of 18% every year.
  • Fruit importers note increased demand for apples, citrus and table grapes, and are keen to fulfil this demand with Australian produce. For example, a leading importer – IG International – is seeking imports of citrus, pear and kiwi from Australia to fulfil monthly orders for 2–3 containers. Citrus Australia is currently developing a five-year export strategy in which India will prominently figure
  • Australian baking brands such as SalDoce Foods are witnessing a rapid increase of 30-50% in monthly in sales for products such as cake mixes and home-baking ingredients. This trend has continued even after lockdowns have been lifted.
  • Australian exports of almonds to India declined by 35% last year as supplies were diverted to China. Nonetheless, India remains the single largest export market for Australian almonds. The Almond Board of Australia Board and Austrade are planning virtual engagements with key Indian partners in November to increase the number of Australian almond importers in India. South India is a particular focus.
  • Demand for Australian canola oil has grown significantly in the past six months. The oil is mainly imported in bulk and bottled in India. According to local sources, Australian canola oil is popular with consumers in India as it is non-GM certified; Australian canola oil is also associated with Australia’s reputation for producing clean and safe foodstuffs. Austrade is now engaging with exporters of canola oil-derived value-added products.

Beverages

  • Australia’s award-winning Barokes Wines have launched their ‘wine in a can’ range in India. The brand is being imported by a Mumbai based company, and distributed across liquor retail chains in major cities. The brand is being positioned as an aspirational, on-the-go drink given its affordable price. Austrade is working on a wine export diversification strategy to aid Australian beverages exporters.
  • Breweries are operating at less than 50% of capacity according to the All India Brewers Association. As a result, barley purchases fell 70 per cent following the harvest in April. It is therefore unlikely that India will import any barley this year. India is one of the largest brewing markets in the world with 83 breweries and 2.6 billion litres produced annually.
  • According to one Mumbai-based importer, there has been a double digit drop in sales of soft drinks during the pandemic. However, the importer recorded a 300% increase in sales of almond-milk products. This appears to indicate that Indian consumers are seeking healthier food and beverage options. This new trend opens export opportunities for Australian nut milk exporters.
  • Wine sales may soon start to recover. The coming festival season will see a gradual reopening of hotels and restaurants, and this should support wine sales. An increase in online purchasing and home delivery is also helping to raise sales in major cities, including Delhi, Mumbai and Bengaluru. Australian vineyards currently have an approximate 30% share of India’s wine imports. September 2020 sales were 50% of 2019.

Fast moving consumer goods

  • Health and wellness considerations are influencing food purchasing trends and new product launches in India. Healthkart, a large Indian health-focused e-commerce platform, says that young consumers (25-35 years) are increasingly likely to prioritise spend on nutraceuticals since the pandemic. Another trend is that consumers who purchase supplements for specific health issues like arthritis and hypertension are adding immunity-building supplements to their shopping bag. This implies growing opportunities for Australian health and wellness exporters.
  • According to Nykaa, India’s largest omni-channel beauty retailer, COVID-19 continues to impact offline stores, with some shutting down. However, increasing online sales have helped recover some losses. Nykaa is using virtual reality shopping technology to give a real-life shopping experience to customers. Australian brands such as Swisse, Sand & Sky and Natio are now present on Nykka sites.
  • Amazon India and Flipkart are ramping up warehousing and logistical operations, expecting a significant lift in sales during the Indian festive season from October to December. The recent Amazon Prime Day resulted in sales of A$820 million in just two days. Several Australian health and processed food brands reported an average eight-times increase in daily sales during the period. This indicates that exporters could benefit from aligning their India marketing strategies with festive seasons in India.

Technology & e-commerce

  • India’s e-commerce festival season is set to take off. According to market research firm, Redseer, sales are expected to leap in value to A$ 9.8 billion from A$ 5.8 billion last year. Austrade is working with Australian brands and their distributors to align inventory and new launches in the next two months. Austrade are also supporting several social media campaigns run by Australian brands as a build up to the festive season.
  • Investments in India’s fin-tech sector have more than doubled in the first six months of 2020, year-on-year. This suggests India's largest banks and insurance companies are investing in digital-economy technologies – including online banking and trading, and cyber security.

Health

  • Swisse has expanded offline distribution through ‘New U’ stores across 36 cities in India. New U is a large health and beauty retailer, owned by India’s leading consumer goods company Dabur. This is the first time that the Indian retailer is selling an imported health supplement brand following an initial focus on beauty products.
  • Clinical research and pharmaceuticals companies are showing renewed interest in conducting clinical trials and joint research in Australia. According to sources, Indian medical care organisations continue to be receptive to Australian digital health products. Meanwhile, clinical research companies are collaborating well with Australian universities. Melbourne based Nucleus Network is hosting Phase 1/2 clinical trials of a vaccine developed by the Serum Institute of India. Around 300 healthy volunteers will participate in this landmark trial in Australia.

Resources & energy

  • India looks set to increase investment in LNG infrastructure to accommodate greater imports. The Government of India’s goal is to increase LNG’s contribution to India’s energy mix from 6% to 15% by 2030. Further details are available in this market insight.
  • Following a memorandum of understanding between the Indian and Australian governments on cooperation in critical and strategic minerals, Austrade is assisting DFAT’s outreach program with Indian stakeholders and potential customers. Currently, Austrade is conducting a demand-side mapping exercise for critical minerals in India. A prioritisation plan has been drawn up covering aerospace, space, defence, electronics, renewable technologies, electric vehicles, paints and special steels.
  • Australian METS suppliers to India are continuing to win business in the region despite travel restrictions. Those with distributors in the market have used Webex and Zoom to pitch solutions to their customers and their in-market reps have helped them to close deals. Austrade is supporting numerous Australian METS by making connections.
  • Policy think tank, NITI Aayog, has launched an initiative under the ‘Advanced Chemistry Cell’ to bring production-linked incentives to manufacturers. India aims to have 50 GWh of battery-manufacturing capacity by 2026. Australian companies are well positioned to supply much-needed material, including lithium, cobalt and nickel. Energy storage initiatives also presents opportunities for strategic partnerships.
  • Senior industry sources in India’s steel industry interpret the recent spate of mining policy reforms as heralding a greater presence of large private-sector players in the sector. These organisations would likely be more amenable to state-of-art METS from overseas, since they benchmark themselves against global best practice.
  • There are growing opportunities for Australian companies to contribute to India’s renewable power sector – including in power trading, power storage technologies, photo-voltaic manufacturing and wind energy – and to provide smart-metering and demand-side management solutions.
  • Representative from India’s resources industry are confident that normal activity levels will resume shortly, leading to a resurgence in demand for overseas METS. In addition, recently announced auctions should lead to a spate of new projects.

Construction & infrastructure

  • Austrade and DFAT are working with Macquarie Infrastructure, a major Australian investor in the Indian highways. The collaboration will showcase the best of Australian technologies and services in road safety to the Indian government. This project will create significant downstream opportunities for Australian SMEs.
  • Rating Agency ICRA has predicted an overall 60% decline in real estate volumes. With consolidation underway, smaller developers are collaborating with the corporatised developers to finish projects. Austrade has been working on a built environment initiative in the region since AIBX 2020 when more than 30 companies connected with hundreds of Indian companies. Austrade continues to assist clients.
  • Austrade has engaged with the Indian Ports Association to identify opportunities for Australian companies after the Indian parliament passed the Major Port Authorities Bill this week. The bill will enable port charges to be competitive, have a single tariff structure for all ports and bring in the landlord model for all ports – with an option for private players to operate. Of the 204 ports in the country, 12 are major ports, including Kandla (Adani), Mumbai, JNPT and Cochin and they contribute almost 85% of traffic.
  • Australian companies are winning contracts in India’s rail industry, including the new Mumbai–Ahmedabad high speed railway, which is currently under construction. This indicates an openness to Australian rail expertise and technology. In addition, Indian Railways are set to offer 109 passenger routes to the private sector. The tender is ongoing.

Education

  • Austrade India, in collaboration with prominent academics from University of Central Queensland and Monash University, delivered two student group mentoring sessions as part of the ‘Future of work’ series. This series aims to position Australian education in India, highlighting the skills needed for careers in artificial intelligence and life sciences.
  • Austrade India is actively exploring partnership opportunities for Australian edtech companies in after-school education. As schools prepare to reopen, a number of edtech platforms, such as Toppr, Udemy, Vedantu and WhiteHat Jr, have introduced skill-based ‘add-on’ courses to retain their relevance when face-to-face learning resumes. This presents an opportunity for Australian edtech providers to explore partnership in this space in India.

Defence & manufacturing

  • India has accelerated its purchases of weapons in the wake of border tensions with China. For Australia, the Australia–India Comprehensive Strategic Partnership will help build connections with India’s defence sector and lays the foundation for enhanced collaboration and development. However, import embargoes and substitution policies (see below) will directly impact some opportunities.
  • The Indian Ministry of Defence (MoD) has announced an import embargo on 101 items. This is a major push by India’s defence to reduce importation costs and support indigenous capabilities. The policy will be implemented progressively until 2024. The implication for Australian defence companies looking to export to India is that they will likely need to find local manufacturing/value-add partners, and share intellectual property.
  • The Japanese Government has added India to its manufacturing re-location scheme. This means companies that re-locate manufacturing from China to Bangladesh or India may now be eligible for subsidies. The Japanese government wants to help its companies diversify their supply chains.

Bangladesh

Food & Agriculture

  • Wheat consumption has doubled in the past six years thanks to changing food habits, and higher use in bakery and other processed foods. Bangladesh imported 6.73 million tonnes (mt) of wheat last financial year compared to 3.1 mt in 2014–15. Imported whole grains are gaining in popularity due to perceived health benefits. Approximately 85 percent of Bangladesh’s annual wheat demand of ~7.7 mt is met by imports, which is increasing thanks to the absence of tariffs. Australia has a minor share of this trade, with the bulk of Australian exports to South Asia heading to India. Austrade is working with exporters to increase wheat exports to Bangladesh, undertaking outreach to bakery and other wheat processing companies.
  • Australia milk-powder exports worth A$20 million in 2019 are growing on the back of increased consumer demand in Bangladesh. Exporters including Fonterra and Agri-Best have sent several shipments this year and signed contracts for the rest of the year. It is predicted that demand from the food manufacturing sector will increase by 40 per cent by 2025. Bangladesh imported 1.5 million tonnes of milk powder last financial year, and imports are projected to grow by 18 per cent this year.
  • Although most Australian brands continue to be sold via supermarkets, sales of have grown 40–50% during the pandemic. Unimart – a premium supermarket chain – has expanded its digital offerings with an omni-channel solution for Australian brands. The retailer recently ran a promotional campaign featuring Western Australia-based Harvey Fresh and New South Wales-based Oak Milk. Unimart is working with Austrade to import more brands from Australia.
  • The Japan International Cooperation Agency (JICA) will implement a A$146 million food value chain-development project to process agricultural products and expand agribusiness in Bangladesh. This project will enhance logistics and storage facilities for fresh produce and likely stimulate greater trade. Australia is one of the major sources of grapes and citrus in Bangladesh with exports worth A$7.6 m last year. Supply chain upgrades will expand opportunities to export strawberries, blueberries and stone fruit to Bangladesh
  • With ready-made garments accounting for nearly 80% of the country’s export revenue, Bangladesh is currently the second largest importer of cotton in the world. After a slump in cotton imports due to the lockdown, most factories have resumed operations and commenced ordering cotton from overseas suppliers including Australia. Australia exported A$200 million worth of raw cotton to Bangladesh during 2018–19. Austrade is re-engaging key buyers alongside Australian exporters to resume shipments of Australian cotton to the market.

Technology & e-commerce

  • The government has proposed new e-commerce guidelines to protect consumers and develop the e-commerce sector. E-commerce has had a boom amid the pandemic and new guidelines will relate to delivery time limits, reimbursement and failed deliveries. Alibaba-backed Daraz has hailed the move, which will substantially improve confidence amongst Bangladesh consumers. The e-commerce market in Bangladesh is currently worth $A 1.7 billion and is projected to be worth A$4.5 billion by 2025.
  • Consumers are embracing e-commerce like never before. Alibaba-owned Daraz and Chaldal have reported 100% monthly increases in their sales over the last few months. The federal government is investing in logistics and supply chain improvements to promote the e-commerce market, which is currently worth A$1.7 billion and projected to be worth A$4.5 billion by 2025. Austrade is working with leading e-commerce platforms to introduce more Australian brands across top-selling categories such as shelf-stable processed food, personal care items, health supplements and wellness foods such as gluten free snacks.

Defence & manufacturing

  • The Japanese Government has added Bangladesh to its manufacturing re-location scheme. This means companies that re-locate manufacturing from China to Bangladesh or India may now be eligible for subsidies. The Japanese government wants to help its companies diversify their supply chains.

Sri Lanka

Food & Agriculture

  • New orders of Australian fresh produce and possibly meat are expected to be placed by the Maldives which has reopened its borders to international tourists. Qatar Airways and Emirates have resumed flights, offering connection to hubs such as Paris and London.
  • The Sri Lankan Government has unveiled an ambitious plan to increase milk production in the country by importing dairy cows and developing private-public partnerships to increase milk production in the country. The government also intends to cultivate grass and other fodder to complement the industry. Sri Lanka currently imports around 80,000 metric tons of milk powder (Australia exports around 5,000 metric tons), and aims to convert this import reliance into domestic-led milk production in the country. Austrade is working with local companies in scoping out export opportunities for our dairy technology and services companies.
  • The Sri Lankan government has unveiled plans to replace 20,000 hectares of land earmarked for palm oil plantation in the country. The government appears keen on canola or sunflower oils. Sri Lanka imported over 150,732 metric tonnes of edible oil last year, while the current government is keen to reduce import dependence in the country. Austrade is scoping export opportunities for canola and sunflower seeds with planters associations.
  • The temporary import restrictions instituted in March 2020 have affected the supply of Australian grains and pulses to Sri Lanka. Although there is no import ban on grains, the lack of foreign exchange has resulted in payment delays for Australian exporters. Currently, banks in Sri Lanka are struggling to secure sufficient US dollars to enable importers to pay for goods. This temporary suspension has also affected other Australian imports such as processed food and wine. Importers currently require 90 days of supplier credit.
  • The federal government is expected to issue new meat import licenses – in particular, beef – as it contemplates a ban on the slaughter of cattle for religious reasons. Food importers anticipate an increase in beef imports alongside import duty reductions. With a population of 21 million, Sri Lanka currently consumes around 37.8 million tonnes per year, excluding demand from the hospitality industry. Australia is currently the largest beef exporter to Sri Lanka, supplying 1,000 tonnes out a total 1,116 tonnes imported last financial year. The slaughter ban is expected to benefit Australia, which has an established beef-export supply chain and relationships in place. Exports from Australia reach Sri Lanka quickly: in 3-4 weeks as compared to 8 weeks from competitors such as the US.

Fast moving consumer goods

  • Australian brands such as Edgel, Leggos, Sanitarium and Fruitco have listed their products on the new Keells e-commerce platform. Keells Super is the second largest supermarket chain in Sri Lanka. Like other retailers, Keells are focussed on setting up e-commerce platforms in the country. Thanks to the pandemic, e-commerce purchases in the FMCG category are expected to grow from 20% to 70%. Austrade is helping companies pursue e-commerce strategies in Sri Lanka.

Education

  • The President of Sri Lanka, Gotabaya Rajapaksa, has emphasised the need to reform the country’s education system and wants student-centric education system to replace exam-centric education. The objective is to encourage more students to attend university.

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