The leading ethnic Indian food company is banking on the changing trend in the country for quick growth, besides keeping an eye open for more acquisitions to expand its business
ADF Foods, the leading ethnic Indian food company, says it's looking for more global acquisitions to expand. The company, which specialises in pickles, chutneys, canned and frozen foods, says that a growing middle class and an increasing acceptance of packaged food in India and abroad is helping the company grow. ADF Foods has a global presence and a large part of its revenues comes from exports. The company has made a re-entry in the Indian market and is hopeful of earning about 40% of its revenues from the domestic market in five years. In an interview with Moneylife, Bimal Thakkar, managing director, ADF Foods Ltd, discussed the company's performance and its plans. Edited excerpts:
Moneylife (ML): What, according to you, are the key trends in the ethnic food market in India and globally? And what is the outlook for the packaged food industry in India?
Bimal Thakkar (BT): Both these markets are totally different, even though they have similar consumers. In India, there is availability of freshly cooked food and domestic help, so the requirements of Indians compared to that of the people abroad are totally different. There they don't have domestic help or time to cook, so they easily accept packaged food. This is also happening in India. Here, organised retail is growing. There are more nuclear families. They have more exposure to the West and all these factors are key factors for the acceptance of canned or packaged food. Overall, the mental block that "packaged food is not good for you" is going off and the packaged food industry is catching up in India.
ML: Your product "ADF Soul" a distinctive pickle made in virgin olive oil, was launched in Pune and Mumbai. According to reports, you are planning to launch it pan-India. How has this product been accepted?
BT: We were a little apprehensive about launching this product in India, as we were not sure if the Indian consumer is ready to pay the premium for it. But we found that the consumer doesn't mind spending extra on a healthy product, as olive oil is good for health. Also, the premiums we are charging are not very high. In fact, we are selling more products of ADF Soul than traditional Indian pickles.
ML: There is a lot of competition in the domestic pickle market. And now you have made an entry in this market. How do you position yourself, given the competition and changing Indian mindset?
BT: Our products are always value for money. Certain niche products, like the olive product, will be sold at premium prices. For the rest we are at par with competitors in terms of pricing, quality.
ML: There has been a dip in mango production this year. Has that affected the production especially of chutneys and pickles?
BT: Luckily, we have been able to source our requirement, both for exports as well as for the domestic market. But our costs have gone up. We will try to balance out and not burden the consumers with price increases. But some amount will be increased in the near future.
ML: ADF Foods recently acquired US-based Elena's Food Specialities, Inc. How has that helped the company in terms of business and positioning in the global market?
BT: The rationale for the Elena acquisition was three-fold. One, it helped us to diversify our range of products into the complimentary range. So here we got into the Mexican food range. Second, we moved up the value chain where we got closer to the customer and to the distribution and sales chain, through which we will now put our Indian products. Third, we have our manufacturing facilities in the US, which is approved by the US Department of Agriculture. This will give us the ability to make meat products in the US.
ML: Since you have made a re-entry in the Indian market, what kind of domestic markets are you planning to tap?
BT: At the moment, our product range is mainly for the urban market, which will also be for the metros and mini-metros having one million-plus population.
ML: And the rural market?
BT: Yes, once we tap these markets, we will put our products in the rural markets as well.
ML: More than 90% revenues are from exports and businesses from global markets. Will this sustain?
BT: Yes, that will continue to grow. But India, in five years, should contribute around 40% of our revenues.
ML: The net profit of the company went up by 104% in the fourth quarter. Despite rising input costs, the company managed to maintain the margins. What will be the strategy going forward? Are you planning any new product launch, or expansion?
BT: The integration of Elena has helped us to grow. In India, we will see growth because it is a totally new market for us. And we are actively looking out for acquisition of foreign companies. We still have a lot of cash on our books.
India, the world's second-biggest producer of wheat, is expected to harvest a record 84.27 million tonne of wheat this year. China, with more than 100 million tonne of output, is the largest wheat producing country in the world
New Delhi: The International Grains Council (IGC) has lowered its global wheat production forecast for 2011-12 to 667 million tonne as crop prospects in countries like the US are not bright due to unfavourable weather, reports PTI.
Earlier, in April, the London-based organisation had pegged global wheat output at 672 million tonne this year. The wheat production forecast for the current year is still higher than the 649 million tonne output last year.
"The outlook for 2011-12 wheat crop has been affected by unfavourable weather in a number of countries, especially in the EU and US, and the forecast of global production is therefore reduced by 5 million tonne to 667 million tonne," the IGC said in its latest Grains Report.
Global wheat demand is expected to touch a new record of 669 million tonne this year, it said.
"Use (of wheat) for ethanol is growing less quickly than expected, including in the EU, while greater use of alternative feeds, including barley, is expected to cut the feeding of wheat in Russia," the report said.
Global wheat trade is still forecast to expand by five million tonne, mainly in North Africa, Near East Asia and the EU, it noted.
India, the world's second-biggest producer of wheat, is expected to harvest a record 84.27 million tonne of wheat this year, according to government data. China, with more than 100 million tonne of output, is the largest wheat producing country in the world.
With respect to global maize production, the global body said that increased planting and higher yields are expected to result in a record output of 848 million tonne in 2011-12, as against 812 million tonne last year.
Larger crops in some countries, including the EU and Indonesia, are expected to limit global maize trade to 92.5 million tonne, down by 1.5% from the previous year, it said.
After Rs1,365 crore of outflows in April 2011, mutual funds have recorded Rs1,480 crore of inflows in May 2011—almost 94% of this amount was from existing schemes
Indian equity funds have recorded a surprisingly robust performance in May.
This huge positive inflow belies the mood prevailing among investors and the marketplace. The Sensex has fallen by 11% (since January to June 2011) and Foreign Institutional Investors (FIIs) have not been investing much in India.
One of the reasons for the net inflows in the last month may be because mutual fund houses are leaving no stone unturned to keep distributors in good humour. Asset Management Companies (AMCs) are paying a higher upfront fee to distribution subsidiaries of foreign and private banks nowadays to drive 'exclusive sales' of their schemes, mainly equity schemes. This commission is in addition to the upfront and annual trail fees that mutual funds pay distributors for selling their schemes.
AMCs are paying large distributors anywhere between Rs50 lakh and Rs2 crore this year as part of the so-called "marketing support" fees. Last year, such payout was in the range of Rs45 lakh to Rs75 lakh. Fund houses said that distributors, who have been deprived of the entry load after its ban since August 2009, are demanding a higher fee, citing difficulty in selling equity schemes in unfavourable market conditions. The marketing support fee would depend on the size of the fund house and performance of the equity scheme. Fund houses with large asset bases, performing funds and good credentials will have to pay less. New and ailing fund houses will be required to pay higher fees.
Ever since the Securities and Exchange Board of India (SEBI) imposed a ban on entry loads, equity funds have suffered redemptions. We mentioned in our article dated 6 May 2011 (Huge mutual fund outflow points to a much deeper malaise) that the regulator needs to address the issue of distributor fees, to make AMCs adopt a better pricing system where the commissions are clear and no other payments to distributors allowed. For such a course correction, SEBI and the mutual fund industry, through the Association of Mutual Funds in India (AMFI), have to sit together. So far, AMFI has done a poor job of putting across the industry's views, which is one of the main reasons why SEBI took the decision without consulting it.