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WATER: A Business Risk to The Food and Beverages Industry?
The organized processed Food and Beverages (F&B) industry in India currently stands at Rs. 250 thousand crores. The industry is growing at 10% annually, but certain products like Instant Noodles, Coffee, Biscuits, and possibly even Milk and Milk Products are high risk industry segments because of the large amounts of water they use. India, with 4% of the world’s water and 16% of the world’s population, is already water stressed. As the scarcity of water becomes apparent, water induced inflation could occur in the near future.
Embodied Value of Water in a food product
This brief introduces the concept of Embodied Vaue of Water and applys it to the value chain of Food and Beverages industry.
Embodied Value of Water (EVW) in a Food Product is defined as the ratio of its average selling price per unit to the amount of water (in liters) that is used to produce a unit of the food product. EVW is depicted in Rupees/ liter or paise/ liter.
It denotes the monetary value of the water that is used in producing a unit of the finished food product. For example, the EVW of Tea is 7 paise. This means that if we were to calculate the price of all the water that goes into making 1 kg tea, it would come to 7 paise.
The lower the EVW in an item, the higher is it’s susceptibility to water scarcity. If the EVW is high, it indicates that the item is priced highly enough to absorb any additional cost that might arise due to increasing water scarcity.
Embodied Value of Water in a food product vis-à-vis Necessity Quotient Analysis
Figure represents the NQ scale on top and the EVW scale at the bottom. As stated earlier, items that have a NQ >3 are vital to our diets, and are therefore, not under risk in the short to medium term. This leaves us with the items that have been circled. Among them, items that are also at the lower end of the EVW scale are Instant Noodles, Chocolates, and Biscuits. As water gets re-priced, these products would be the first ones to be replaced or discarded. That is why these products have been labelled as “High Risk” products at the start of this report.
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