Adani Wilmar’s profitability affected by lower edible oil prices and inflation; reports 60% decline in PAT for FY23

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May 3, 2023

Adani Wilmar, a major player in the FMCG industry, reported in a regulatory filing that their profitability for the quarter ending on March 31, 2023 was negatively impacted by various factors. These included rising costs for packaging and logistics, ongoing decreases in edible oil prices, and the financial burden of maintaining high-cost inventory. In particular, inflation was cited as a contributing factor to the increased costs of packaging and logistics.

“H1’23 witnessed multiple macro events causing high volatility in edible oil prices, with record high prices in Q1 and subsequent crash of prices in Q2,” said the company adding that in H2 of 2023, prices gradually declined to reach lower levels, leading to better demand trends.

Adani Wilmar stated that there was a comparable pattern in food prices, with a significant increase in inflation during the first half of 2023 followed by a decline in the latter half of the year.

According to its Q4 results, the manufacturer of Fortune oil revealed a 7% decrease in its combined revenue to INR 13,873 crore, attributed to a drop in edible oil prices. Adani Wilmar also disclosed a 7% rise in revenue for FY23 at INR 58,185 crore compared to the previous year. However, its profit after tax experienced a 60% decrease, amounting to INR 582 crore.

In FY23, the company achieved a significant milestone by surpassing 5 million metric tonnes in sales, driven by the expansion of select products and a sizable addressable market.

Angshu Mallick, MD, and CEO, Adani Wilmar, said, “We are investing in the business to support our growth. Our margins during the quarter and full year got impacted by high-cost inventory in a falling edible oil price environment, inflation impact on our operational costs, and an increase in interest costs due to rate hikes.”

In FY23, Adani Wilmar’s revenue was mainly driven by the sale of edible oils, which constituted just over 60% of the revenue at INR 46,104 crore. The food and FMCG business contributed to 16% of the revenue, while industry essentials contributed to 22%.

Commenting on its edible oil business, the retailer said, “The segment’s branded sales volume grew by 4% during the quarter, on the back of good consumer demand due to softened edible oil prices. However, overall oil sales volume was dragged down due to lower demand from the bakery and frying industry.”

Adani Wilmar aims to apply the same strategies that led to the success of its edible oils business to its food and FMCG segment, which recorded a revenue of INR 4,053 crore in the 2023 fiscal year, marking a significant increase from the previous year.

The brand reported making significant progress and increasing its market share across various food products.

Adani Wilmar disclosed in its regulatory filing that its wheat flour and rice businesses both achieved revenue exceeding INR 1,000 crore in FY23.

“Both of our top product categories – Wheat Flour and Rice have been growing well. The Company expects the strong growth to continue in both the products for many years, given the large headroom in the kitchen essential products.”

The FMCG giant stated that it plans to capitalize on the brand value of Kohinoor, a basmati rice brand it recently acquired, and has set its sights on strengthening its position in the rice market.

Equity-based Funding VS Debt Funding. Which is the right fundraising strategy for your food business?

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May 3, 2023

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Starting and running a food business can be a challenging task, especially when it comes to financing. Most entrepreneurs face the dilemma of whether to opt for equity-based funding or debt funding. Both these funding options have their pros and cons, and it is important to understand which option suits your business needs the most.

Funding is crucial for a food business to start, grow, and expand. It allows the business to invest in the necessary equipment, infrastructure, technology, marketing, and talent. Proper funding can help the business weather unexpected challenges, such as supply chain disruptions, equipment breakdowns, and other unforeseen expenses.

It can also provide the financial cushion necessary to sustain the business during its early stages, when it may not be profitable yet. Adequate funding can also help a food business to scale its operations, reach new markets, and ultimately increase profitability.

Equity-based funding and debt funding are the two main types of financing options available to businesses. Equity-based funding involves selling a portion of the ownership of the company to investors in exchange for capital, while debt funding involves borrowing money from a lender and paying it back over time with interest.

This will aim to provide an in-depth analysis of equity-based funding and debt funding for food businesses, highlighting their Advantages and Disadvantages, benefits and drawbacks.

Equity-Based Funding:

Equity-based funding involves raising capital by selling a portion of your business to investors in exchange for their investment. In other words, you are giving up ownership of your business in exchange for money. This option is desirable to entrepreneurs who are looking to raise a large amount of capital quickly and who are willing to share control of their business with investors.

Advantages of equity-based funding:

1. No repayment obligations: Equity-based funding does not require any repayment, unlike debt financing which involves paying back the borrowed amount with interest.

2. Shared risk: Equity financing enables the business to share the financial risk with the investor. In the event of business failure, the investor bears the loss along with the entrepreneur.

3. Access to expertise: Equity investors may bring a wealth of experience and expertise to the business, providing valuable guidance and support.

4. No collateral requirements: Unlike debt financing, equity financing does not require any collateral, such as personal assets, to secure the investment.

Disadvantages of equity-based funding:

1. Loss of control: When a business raises equity, it gives up a portion of ownership and control to the investors.

2. Costly: Equity financing can be expensive, as investors typically expect a high rate of return on their investment.

3. Dilution of ownership: Raising equity means diluting the ownership of the existing shareholders, which can lead to a loss of control and decision-making power.

4. Sharing of profits: Equity financing means sharing the profits with the investors, as they are entitled to a share of the company’s earnings.

Debt Funding:

Debt funding, on the other hand, involves borrowing money from a lender, usually a bank or financial institution, and paying it back with interest over a specified time. This option is particularly attractive to entrepreneurs who want to maintain control of their businesses and who are confident in their ability to generate enough revenue to pay back their loans.

Advantages of debt funding:

1. Retained ownership: Debt financing allows business owners to maintain ownership of their business, as the lenders do not have any ownership or control over the business.

2. Fixed payments: Debt financing involves fixed payments, making it easier for business owners to plan their cash flow and budget accordingly.

3. Tax benefits: The interest paid on debt financing is tax-deductible, which can result in lower tax bills for the business.

Disadvantages of debt funding:

1. Interest payments: Debt financing involves regular interest payments, which can add up over time and increase the overall cost of borrowing.

2. Collateral requirement: Many lenders require collateral to secure the loan, which can be a risk if the business is unable to make the payments and the collateral is seized.

3. Creditworthiness: Lenders often consider a business’s creditworthiness when deciding whether to lend, which can be a challenge for startups or businesses with poor credit.

4. Limited funding: Lenders may be hesitant to provide large amounts of funding, which can limit the growth potential of the business.

Deciding between equity-based and debt funding for a food business requires careful consideration of various factors. It is important to assess the financial needs of the business, the potential risks and rewards, and the overall impact on the company’s long-term goals.

While equity-based funding offers greater flexibility and potential for growth, it also involves sharing ownership and profits with investors. On the other hand, debt funding offers greater control and avoids diluting ownership, but also involves higher interest payments and strict repayment schedules. Ultimately, the decision should be based on the specific needs and circumstances of the food business and should be made after consulting with experienced financial advisors and investors.

Mondelez International promotes Deepak Iyer to oversee $6.8 billion AMEA business as EVP and President

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May 3, 2023

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Chocolate and cookie maker Mondelēz International is set to see a leadership change, as Deepak Iyer, the current President for India & Southeast Asia, is being elevated to a higher position. Effective June 5th, Iyer will take on the role of Executive Vice President and President of the Asia Pacific, Middle East and Africa (AMEA) region.

As the new Executive Vice President and President of the AMEA region, Deepak Iyer will have a significant responsibility at Mondelēz International. He will oversee the company’s operations across more than 70 countries, with a business worth $6.8 billion, and lead several iconic brands such as Oreo, belVita biscuits, Cadbury chocolate, and Kinh Do cakes. While Iyer takes on this crucial role, Mondelēz International has not yet announced a successor to his current position.

Dirk Van de Put Chairman and CEO of Mondelēz International, said, “With close to three decades of leadership experience and a strong track record of success driving the growth of brands in emerging markets across Asia and Africa, Deepak is the ideal leader to continue our strong and sustained growth across the AMEA region.”

“Under his leadership these past six and a half years, India has delivered strong, profitable growth and become a consistent exporter of talent and best practices across our global network,” he said.

From 2016, Deepak Iyer has been instrumental in leading Mondelēz International’s India business, achieving consistent double-digit revenue growth and expanding profit margins. Under his leadership, the company also generated strong cash flow and embraced advanced technologies while leveraging consumer data. Iyer’s successful tenure in India positions him well to take on the new role of Executive Vice President and President of the AMEA region.

Mondelēz International witnessed a notable increase in revenue in FY22, reporting a 16% jump from the previous year, with a total of INR 9,296 crore. As part of its growth plans, the company’s India division has committed to investing INR 4,000 crore over the next four years to expand manufacturing capacity, build new warehouses, and establish cold-chain facilities. This investment demonstrates Mondelēz International’s dedication to expanding its presence in India and continuing to deliver high-quality products to its customers.

With more than thirty years of management experience, Deepak Iyer brings a wealth of knowledge and expertise to his new role. He has held senior positions across sales, marketing, and general management, overseeing operations in India, Southeast Asia, and Africa. Prior to joining Mondelēz International, Iyer worked at prominent consumer goods companies such as PepsiCo, Marico, and Wrigley India Pvt Ltd, where he served as Managing Director. Iyer holds an MBA and is a qualified engineer, underscoring his technical and business acumen.

Maurizio Brusadelli, Mondelēz International’s current Executive Vice President and President of the AMEA region, will be stepping down from his position in June to pursue a new leadership opportunity. Deepak Iyer will assume Brusadelli’s role, taking charge of the company’s operations in Asia Pacific, Middle East, and Africa. This leadership transition marks a significant change for Mondelēz International, as the company navigates new opportunities and challenges in the global market.

Godrej Consumer Products to raise INR 5,000 crore via NCDs; board to consider proposal for fundraising

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May 3, 2023

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Godrej Consumer Products Ltd (GCPL) on Tuesday announced its plan to raise INR 5,000 crore from the market by issuing Non-Convertible Debentures (NCDs).

According to a board meeting update, the FMCG division of the Godrej group, which is scheduled to approve its financial results for the March quarter on May 10, will also assess a fundraising proposal.

“… at the same meeting, the board may also inter alia, consider approval of raising of funds by way of issuance of Non-Convertible Debentures (NCDs) aggregating to an amount up to INR 5,000 crore in one or more tranches,” said GCPL in a regulatory filing.

GCPL, which owns well-known brands like Good Knight and HIT, stated that the amount will be raised in one or more tranches.

Last week, GCPL made public its acquisition of the FMCG business of Raymond, which includes the brands Park Avenue, Kamasutra, and Premium, for a sum of INR 2,825 crore. The business is owned by the Singhania family.

Godrej Consumer Products Ltd (GCPL) reported a revenue of INR 6,951.56 for the fiscal year that ended on March 31, 2022.

When the acquisition was announced, Sudhir Sitapati, the Managing Director and CEO of GCPL, stated that it would expand the company’s reach in the chemist channels and increase its addressable market in the fast-growing area.

The recent acquisition of the FMCG business of Raymond is the 14th for the Godrej group firm, as part of its expansion strategy. Its last major acquisition was Strength of Nature LLC in 2016.

Japan’s Sumitomo Corp enters insect protein market with fish feed launch

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May 3, 2023

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Sumitomo Corp., one of Japan’s largest trading houses, is set to become the country’s first major company to sell insect-based feed for farmed fish. Starting later this year, the innovative feed will be available to customers, signaling a new era in sustainable aquaculture practices.

Insects have gained worldwide attention as a promising protein source in the context of decarbonization initiatives. The company’s objective is to import and market 30,000 tonnes of insect feed by 2030.

Having a stake in Singapore-based startup Nutrition Technologies, Sumitomo has acquired the exclusive distribution rights in Japan. The startup specializes in grinding black soldier fly larvae into powder, which is then used to create fish feed and pet food. With an annual production of around 3,000 tonnes of insect feed, Nutrition Technologies holds the second-largest volume worldwide.

Sumitomo is aiming to capture 7.5% of the 400,000 tonnes of fish meals that are consumed annually in Japan. The expected price of the insect feed will be approximately JPY 200,000 (USD 1,490) per tonne, which is similar to the price of fish meal.

The competitiveness of Nutrition Technologies is expected to hinge on the sustainability of their product. To this end, the company utilizes wood waste obtained from makers of processed food as a food source for the flies, highlighting their eco-friendliness.

In addition to being eco-friendly, this approach also aids in reducing carbon dioxide emissions for the food makers, as the wood waste that would otherwise be incinerated is repurposed.

Furthermore, Nutrition Technologies has the added advantage of not requiring any heating equipment for the cultivation of flies, as their facilities are situated in Southeast Asia, which benefits from a warm tropical climate. In contrast, two competitors in the industry, Protix in Holland and Innovafeed in France, have larger production capacities but are dependent on electricity for heating, as their facilities are located in Europe.

The insect feed market in Japan is relatively small, and data on it is limited. However, according to TPC Marketing Research, the country’s edible insect market is reportedly larger than that of insect feed, with a market size of approximately JPY 1.4 billion in 2022. TPC Marketing Research is based in Osaka.

The market for insect feed is projected to expand rapidly worldwide. Meticulous Research, a US-based firm, predicts that the global market for insect-derived alternative protein for both human consumption and animal feed will increase from JPY 17.5 billion in 2020 to approximately JPY 1.3 trillion by 2030.

Sumitomo aims to acquire marketing expertise in Japan, which it can leverage when expanding into international markets.

Insect protein is garnering interest as an eco-friendly feed option due to the significant reduction in CO2 emissions during production. As per certain evaluations, the production of one kilogram of insect-based protein can be nearly CO2-free.

Several other Japanese trading companies and startups are also investing heavily in insect feed, as it appears to be more palatable to consumers than edible insects.

In March, Marubeni and French insect farming startup, Ynsect, reached a preliminary agreement to collaborate on entering the Japanese market. The companies will work together on the research and development of insect feed for farmed fish, such as red sea bream and yellowtail, and intend to establish production facilities in Japan using Ynsect’s technology.

Booon, a startup launched by Nagasaki University, has initiated research on an innovative approach for cultivating mealworms. This technique employs container-type equipment to minimize both environmental burdens and expenses.

Although the United Nations predicts that the global population may rise by 23% from 2021 to reach 9.7 billion in 2050, it remains uncertain whether sufficient protein sources can be obtained to satisfy the needs of this expanding population.

As the world moves towards decarbonization on a global scale, protein sources that generate significant amounts of CO2 during production are encountering challenges. Insect feed could offer a solution to mitigate this issue.

Drools partners with actress Mouni Roy for donation drive to support stray animals

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May 3, 2023

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In a notable move towards promoting animal welfare, Drools, one of the leading pet food brands in India, partnered with actress Mouni Roy. The two collaborated for a recent donation drive aimed at supporting stray cats and dogs. On May 2nd, 2023, Mouni Roy and Drools donated a substantial amount of food and supplies, which would last for three months, to the All About Them Foundation located in Worli. This partnership demonstrates a positive approach to animal welfare and encourages others to contribute to this cause.

For over 30 years, Drools has been a leader in the field of animal nutrition, committed to improving the lives of stray animals through the provision of wholesome and nutritious pet food. The brand places great emphasis on promoting animal welfare and care in all of its endeavors and frequently teams up with celebrities who share its philosophy and can inspire people to prioritize high-quality pet nutrition.

Speaking about the donative drive and her collaboration with Drools, Mouni Roy said, “Being a pet parent myself, I understand the importance of providing good nutrition and care to our furry friends. Every animal deserves a healthy diet. As a responsible member of society, it is our duty to extend our support and help these animals and I am glad to partner with Drools to support their mission of improving the lives of stray animals. I hope this donation drive inspires many others to take action towards the well-being of animals in need.”

In addition to striving for business excellence, Drools is also driven by a strong commitment to giving back to society by undertaking several animal welfare initiatives. Since 2019, the brand has been supporting local NGOs and animal shelters by donating pet food supplies. As it moves forward, the brand aims to expand and reinforce its efforts towards similar endeavors, furthering its impact on the welfare of animals in need.

Perfetti Van Melle taps Swiggy executive Saurabh Nath for key leadership role

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May 3, 2023

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Perfetti Van Melle, a food and beverage company located in Amsterdam, has named Saurabh Nath as their new Associate Director.

Nath posted an update on LinkedIn to announce his new position, stating, “I’m happy to share that I’m starting a new position as associate director at Perfetti Van Melle!”

“Glad to be back with FMCG. Strong brands, great room for product innovation and brand building through storytelling. Very excited to join PVMI, a global leader in confectionery with iconic global brands,” Nath added.

With an experience of more than ten years in the marketing industry, Nath has worked with multiple renowned brands including Ola, OZiva, and Kellogg Company throughout his professional journey.

After serving as the Head of Brand Marketing at Swiggy for a year, Nath has left the organization to pursue other opportunities.

In March 2021, Nath became a part of the food aggregator platform and held the responsibility of leading the brand marketing efforts for both Swiggy’s masterbrand and delivery business.

Before joining Swiggy, Nath had worked as the Head of Marketing at OZiva, a D2C nutrition and wellness startup, from August 2020 until his departure in March 2021.

Nath’s career began at Kimberly-Clark Lever, where he held the role of Assistant Manager-Consumer and Marketing Insights. He later transitioned to Kellogg Company, where he spent more than seven years as Associate Director of Marketing for the Motherbrand Portfolio. In this position, he was responsible for overseeing Kellogg’s Corn Flakes, Kellogg’s Muesli, and Kellogg’s Granola.

Edible oil companies announce up to 6% price reduction following commodity rates dip

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May 3, 2023

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Edible oil companies have chosen to lower cooking oil prices by a maximum of 6% in response to the government’s recommendation to align the maximum retail price (MRP) with the drop in international commodity rates.

Fortune, the cooking oil brand sold by Adani Wilmar, and Gemini Edible and Fats India, the company that owns the Gemini brand, have both agreed to reduce their prices by INR 5/litre and INR 10/litre, respectively. They have indicated that consumers can expect to see the benefit of these price cuts in approximately three weeks.

The Solvent Extractors’ Association (SEA) on Tuesday issued a statement saying, “The Department of Food and Consumer Affairs has advised SEA to inform its members to reduce the MRP on edible oils and pass on the benefits to the consumers.”

“International prices have been sharply reduced in the last six months; especially in the last 60 days. Despite the bumper production of groundnut, soyabean and mustard, the local prices have not declined in line with the international markets. The prices of edible oil (MRP) in the domestic market seems to be on a higher side, considering prevailing market scenario,” said SEA.

Bombay high court bars restaurants from serving hookahs under eating house licenses

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May 3, 2023

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The Bombay high court recently declared that restaurants are prohibited from operating hookah parlours on their licensed premises. Additionally, the court asserted that serving hookah, whether herbal or not, from service areas of eating establishments is not permitted under their license.

“It cannot be countenanced that grant of a license to conduct an eating house is deemed to include a license to conduct hookah activities,” said the division bench of justice Girish Kulkarni and justice RN Laddha while rejecting a petition filed by Sayli Parkhi, an entrepreneur who owns M/s. Parkhi Hospitalities and runs The Orange Mint restaurant in Chembur.

She approached the high court after a health officer from the M/West ward of the Brihanmumbai Municipal Corporation (BMC) ordered the restaurant to stop serving hookah in its service area within seven days on April 18, 2023. The health officer also warned that failure to comply would result in the revocation of the restaurant’s eating house license.

The restaurant owner argued that Section 394 of the Mumbai Municipal Corporation Act, 1888, which governs license conditions, does not pertain to the matter of hookah activity in a restaurant.

In contrast, the BMC asserted that obtaining an eating house license under Section 394 of the MMC Act did not authorize the petitioner to engage in any hookah-related activities, including the serving of herbal hookah, within the licensed establishment.

The high court upheld the BMC’s stance and dismissed the restaurant owner’s claim that the eating house license granted to her authorized “hookah activities” or the provision of hookah services on the licensed premises. The bench deemed the owner’s argument to be “completely baseless.”

“The canvass of Section 394 of the MMC Act, is quite broad to take within its ambit articles, trade, operations, which are dangerous to life, health or which are likely to create nuisance, as quite extensively described in the provision,” said the bench. “Thus, a narrow interpretation cannot be attributed to Section 394.”

“If the connotation of Section 394 of the MMC Act as canvassed on behalf of the petitioner, is accepted, it would be nothing but doing violence to the said provision, as such interpretation would mean that once an eating house license is granted, it would deem to include permission to conduct activities of a hookah parlour, or other similar activities,” the court said.

Regarding the serving of “herbal” hookah, the court noted that even the eating house may not be able to regulate the ingredients of the hookah once the apparatus is in the possession of the customers, let alone the civic authorities.

The judges said in a restaurant or an eating house, where children, women and elderly visit for refreshments/eating, it cannot be expected that hookah is one of the menu items. “This would amount to an absolute nuisance in so far as an eating house is concerned,” the court added.

In addition, the court dismissed the petitioner’s claim that the order was arbitrary, stating that the civic order explicitly outlined the violation of license conditions supported by available evidence. The court also highlighted that the order was issued after the civic authorities conducted two inspections of the establishment and issued show cause notices to the owners.

Coca-Cola’s Costa Coffee goes all-in on India, targets rapid expansion in top 8-10 cities

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May 3, 2023

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Costa Coffee, which is owned by Coca-Cola and is a top coffee chain, is placing a significant bet on India by expanding its reach in major cities. The restaurant franchise, managed by Devyani International in India, aims to bolster its nationwide presence over the next three years.

Vinay Nair, General Manager, India & Emerging Markets, Costa Coffee, said, “We believe India can be a significant growth story for Costa Coffee’s global business.”

He added, “Last year, we kickstarted our expansion in India (after Coca-Cola took over the brand in 2018-19) with Devyani International and added about 60 stores.”

Costa Coffee launched its 100th outlet in Delhi, India in January and presently runs 115 stores. The brand aims to fortify its market share in the current regions and venture into unexplored cities.

Delhi's coolest hangout spot just got a lot more cooler. Have you visited our store in Khan Market?#CostaCoffeeIndia #CostaCoffee #CostaClubIndia pic.twitter.com/tn1cn3DqFT
— Costa Coffee India (@CostaCoffeeInd) January 23, 2023

“We are following a cluster-based approach for the expansion. So over the next three years, we expect to have a strong presence in the top 8-10 cities along with the adjacent markets. We are also tapping into specialised channels at airports, highways, and healthcare,” Nair explained.

The coffee chain is considering expanding its operations in the Mumbai-Pune, Bengaluru, and Hyderabad clusters.

“Coffee culture is still in the early stage of category development in a tea-drinking nation of ours. Young consumers are increasingly embracing coffee as a category, and there is a thriving coffee community in India. There is a growing interest in speciality coffee. We are quite bullish about the India consumption story, as for us, coffee is a long-term bet,” he added.

With the introduction of its new campaign ‘You x Costa Coffee,’ the brand has also revitalized its brand positioning.

“We have been building up to this over the past six months and all our new stores are being launched with the “uplift design” elements. This initiative aims to enable the brand to strengthen its connection with the current and next generation of coffee drinks as our outlets serve as networking and socialising hotspots,” Nair added.

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