F&G retailers set for strong 14-15% revenue surge in FY2025: CRISIL

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December 22, 2023

Despite facing intense competition from quick commerce channels, organized brick-and-mortar food and grocery (F&G) retailers are poised for robust revenue growth of 14-15% in fiscal 2025, fueled by sustained healthy demand and expansion into under-penetrated Tier II and III cities.

This marks three consecutive years of robust growth, following a 30% increase in the last fiscal year and an anticipated 15% growth in the current one. Nevertheless, the modest demand in the discretionary segment, encompassing general merchandise such as crockery, home appliances, utensils, and apparel, due to inflationary pressures, is expected to constrain the sector’s operating margin within the range of 6.0-6.5% in the current and upcoming fiscal years (compared to 6.9% in the last fiscal year).

“Healthy demand outlook and low organised penetration will ensure mid-teens revenue growth for F&G retailers this fiscal and the next. We expect area addition of CRISIL Ratings-rated players to increase 20% cumulatively over fiscals 2024 and 2025 on a high base following a substantial increase of 40% in fiscals 2022 and 2023. Incumbent retailers are also expanding into omnichannel platform – includes brick-and-mortar stores and online formats – to compete with quick commerce players. But then, they will ensure calibrated investments to restrict cash burn in the online format,” said Poonam Upadhyay, Director, CRISIL Ratings.

Just to note, F&G retailers derive 75-77% of their revenue from food and non-food grocery, with the remaining portion coming from the sale of discretionary products at F&G outlets. Additionally, the discretionary segment provides F&G retailers with relatively higher profit margins.

Capital expenditure (capex) spending in the segment is expected to stay robust. Nevertheless, robust cash flows and a consistent working capital cycle will restrict the reliance of players on external debt, thereby ensuring resilient balance sheets and stable credit profiles.

An analysis by CRISIL Ratings of six players, representing one-fourth of the INR 2.4 lakh crore organized Food and Grocery (F&G) market in the last fiscal year, affirms this observation.

Despite the normalization in the rate of expansion in the area under operations, the sector’s revenue density (revenue per square foot, or sq ft) is projected to be INR 33,600 in the next fiscal year. This figure remains 10% below the pre-pandemic peak, as illustrated in the annexure chart. The main factor contributing to this is the slower-than-anticipated increase in the number of store openings over the past two fiscal years, particularly in metros and Tier I cities, attributed to heightened competition from the quick commerce segment.

While quick commerce is projected to experience strong growth of 30% in the medium term, its market share within the Food and Grocery (F&G) segment is anticipated to hover around 9-11%, with the brick-and-mortar format maintaining dominance. Nevertheless, organized brick-and-mortar retailers are actively investing in omnichannel offerings to improve customer convenience, responding to the increasing popularity of quick commerce.

Due to ongoing inflationary pressures, demand from the discretionary segment is foreseen to stay modest, with its share decreasing to 22-23% from approximately 29% before the pandemic. As the contribution from this segment is expected to remain subdued in fiscal 2025, it will impact the gross margins of F&G retailers. Nevertheless, the advantages of operating leverage resulting from increased revenues are anticipated to counterbalance this impact, maintaining operating profitability within the range of 6.0-6.5% in the current and upcoming fiscal years.

Shounak Chakravarty, Associate Director, CRISIL Ratings, said “Strong cash flows and well-managed working capital will obviate any need for material debt raising, leading to continued healthy balance sheets for CRISIL Ratings-rated F&G players.”

EGGDROP sets its sights on Philippine expansion with new store openings

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December 22, 2023

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EGGDROP, a South Korean egg sandwich franchise by Golden Hind, has announced its plans to open five stores in the Philippines.

This signifies EGGDROP’s second global expansion, following a ten-store agreement in Thailand, where the brand made its debut in December 2023.

EGGDROP has finalized a multi-franchise agreement to provide Filipino consumers with a fresh and wholesome culinary experience.

The company intends to launch two stores in the country during the first half of 2024, followed by an additional three in the second half of the year.

The brand’s entry into the Philippines is part of Golden Hind’s overseas expansion strategy.

Strategically positioned in key locations, the stores aim to attract a diverse customer base.

Golden Hind CEO Youngwoo Noh stated, “We are very excited to announce EGGDROP’s second international expansion. We look forward to providing a fun experience for consumers in the Philippines.

“In addition to Thailand and the Philippines, EGGDROP is actively seeking master franchise partners in other countries such as the US and Japan to strengthen the brand’s presence globally.”

EGGDROP opened its first store in 2017 and has expanded to a total of 298 stores in South Korea by November 2023.

The company has received franchise inquiries from over 30 countries globally, including the US, Japan, Taiwan, Hong Kong, and India.

Palace Culture’s plant-based cheese sales soar following successful UK retail debut

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December 22, 2023

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The UK’s Palace Culture has witnessed a threefold surge in plant-based cheese sales since its introduction in November at the local Waitrose grocery chain, guided by The Compleat Food Group.

Established in 2021 through a merger backed by investors between Winterbotham Darby and Addo Food Group, The Compleat Food Group acquired the London-based startup in October for an undisclosed amount.

Founded in 2018 by Mirko Parmigiani, Palace Culture successfully secured listings in Waitrose for three of its artisanal plant-based cheese brands – Kimcheeze, The Mouldy Goaty, and Holy Smokes. Sales commenced in mid-November, and the company is poised to expand its presence to other major UK retailers as early as 2024.

“In just three weeks, demand has already tripled from the first week,” Parmigiani shared. “This indicates a growing appetite for plant-based foods, particularly premium plant-based cheese. Our aim is to become the leading brand in the premium plant-based cheese market.”

“The focus is Waitrose at the moment, make sure it works well, and then eventually, in the next six to 18 months, start working on approaching the other retailers.”

Palace Culture crafts its cheeses from cashew nuts and almonds using the fermentation process, relying on natural ingredients without additives or preservatives. Additionally, the cheeses hold organic certification, adding to their premium quality, as acknowledged by Parmigiani.

Nevertheless, he mentioned that the current collection of three varieties, accessible in 89 of Waitrose’s “largest” stores nationwide, is priced competitively with other artisanal plant-based cheeses.

Many of those, he said, have additives like tapioca or coconut oils, unlike Palace Culture’s cheeses.

“Before The Compleat Food Group takeover, our cheeses were more expensive because we were making smaller quantities. We’ve been able to bring that price down because we are able to manufacture at scale,” Parmigiani added.

Prior to coming under new owners, the start-up was selling a range of about 11 varieties in farmers’ markets but in order to get into retail “we had to make more of a clean start and focus on three to start with”, he said.

However, Palace Culture has an active pipeline and is aiming to bring a plant-based feta and blue cheese to market in the new year, hopefully with Waitrose and other retailers, Parmigiani said.

He explained the feta is fermented and matured in wooden barrels, making Palace Culture unique in the UK, adding the biggest challenge when scaling up the whole cheese range is retaining the quality and staying close to its roots.

“Our focus is to make delicious food rather than focus on vegan. We’re not trying to replicate real cheese because it’s not going to have the taste of a goat cheese or a cow cheese because it’s not made with cow’s milk. But it has that sensation of real cheese,” Parmigiani said.

Palace Culture “excelled” on the sales targets initially set out by The Compleat Food Group in the first few weeks after launch but no firm targets have yet been laid out for the new year, he said, declining to provide growth rates.

The start-up is no longer manufacturing at its original location in Bermondsey, London, and has switched production to The Compleat Food Group’s close-by site in Redhill, Surrey, one of the company’s multiple UK plants.

“Obviously, this is a great time to launch at Christmas – it was a boost with orders,” Parmigiani said. “We’re really looking forward to the new year and we’re already working on orders for Veganuary.”

France’s Unigrains eyes Iberian market, plans strategic investments following Madrid office launch

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December 22, 2023

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Unigrains, the France-based agri-food investor, has set its sights on backing another business in Iberia next year, following the recent establishment of an office in Madrid.

Since 2017, the investor, actively seeking opportunities beyond its domestic market, has invested €50 million ($54.9 million) in transactions with companies in the Iberian region.

Last year, Unigrains entered into a deal, becoming a minority shareholder in the Spain-based meat group La Finca, with the transaction also involving the private-equity firm Capza.

According to a spokesperson from Unigrains, the establishment of the new Iberian office is a key element of the firm’s “international development ambition.”

He said, “The Madrid-based subsidiary operates exactly on the same model as the Italian subsidiary we launched last year.

“Unigrains Iberia will aim to invest €80-100m over five years in Spanish and Portuguese companies across the agri-food sector, directly from Unigrains’ equity capital. The creation of Unigrains Iberia indicates a significant step-up in and a long-term commitment to Spain and Portugal with the ambition to be a direct investor – as we are historically in France – with a local investment team.”

Unigrains’ transactions in Italy have involved acquiring interests in the seafood supplier Urbis Food and several bakery businesses currently operating under the Vivaldi Group. Upon the establishment of Unigrains Italia, the investor disclosed a comparable budget of €80-100 million over a five-year period.

The latest food-related transaction in France for the investor occurred last year, involving the acquisition of shares in the oil producer Huilerie Cauvin. This week, the company made an investment in the French wine distributor Elan.

The spokesperson added Unigrains “would be delighted” to complete a first investment via the new Iberia subsidiary in 2024.

“Obviously, it’s dependent on many different factors and there’s not particular urgency. This is a long-term project,” he said.

Unigrains has hired former Portobello Capital executive Álvaro Hernández López-Quesada to lead the new subsidiary.

CJ CheilJedang to launch Excycle Basak Chip worldwide, offering a tasty twist to sustainable eating

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December 22, 2023

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South Korean food company CJ CheilJedang Corp. unveiled its Excycle Basak Chip on Thursday, marking the international debut of this innovative snack. Developed through their in-house venture initiative, the chip is rooted in the principle of food upcycling, reflecting the company’s commitment to sustainable and creative culinary solutions in the global market.

In April 2022, the Excycle Basak Chip made its debut in the local market. Designed with health-conscious consumers in mind, this snack was created to meet the demand for eco-friendly snack options, as stated by the company.

With a composition comprising as much as 30% of food by-products such as broken rice and soybean residue, it adheres to CJ CheilJedang’s dedication to environmental, social, and governance (ESG) values.

Each packet is adorned with 7g of protein and 5g of dietary fiber, encased in sustainable packaging crafted from recycled PET bottles.

CJ CheilJedang rolled out three flavors of Basak Chips – Original, Hot Spicy, and Truffle – in the United States, Malaysia, and Hong Kong.

The company is focused on consistently introducing innovative products that align with eco-friendly practices, offer high protein content, and are rich in dietary fiber. This approach aims to accelerate its penetration into overseas markets.

Within the United States, this snack is strategically tailored to appeal to ethnic food markets, tapping into the increasing demand in North America for health-conscious and value-driven snacking choices.

Meanwhile, in Malaysia and Hong Kong, the product has made its way into mainstream channels, including AEON malls, capitalizing on the positive reputation of K-food.

The global shift towards sustainability and health awareness has been fueling a surge in demand for “Better For You” products.

There is a growing preference for products aligning with this trend, emphasizing the use of plant-based ingredients, minimizing additives, and incorporating functional benefits such as increased protein and dietary fiber content.

Nike adapts to shifting market dynamics: Yearly sales outlook revised, shares drop 11%

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December 22, 2023

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On Thursday, Nike revised its yearly sales outlook, attributing the adjustment to conservative consumer spending, a less robust online business, increased promotional activities. The company also disclosed its intention to reduce supplies of critical product lines as a cost-management strategy, leading to an 11% decline in its shares.

The company said it aims to achieve $2 billion in savings over the next three years. This objective involves implementing measures such as tightening the supply of certain products, optimizing the supply chain, reducing management layers, and increasing the utilization of automation.

Nike’s wholesale business faces ongoing challenges, with retailers reducing orders due to fluctuating demand. This downturn is evident in online sales, compelling the company to increase promotions to attract dwindling shoppers. Additionally, sales in China have decelerated, reflecting the impact of the stumbling economy.

“We are seeing indications of more cautious consumer behavior around the world,” Nike’s finance chief Matthew Friend said on a post-earnings call.

Nike projected a roughly 1% increase in full fiscal-year revenue, marking a decline from its previous forecast of mid-single-digit percentage growth. According to LSEG data, analysts had anticipated a 3.8% increase.

“Nike’s talking about reducing the number of products … perhaps the company feels there are too many products that are not high-margin and not really generating significant sales,” David Swartz, senior equity analyst at Morningstar, said.

However, Nike also announced the introduction of newer styles aimed at captivating consumers, building upon the success of recent releases such as the Sabrina 1, LeBron 21, and Tatum 1 basketball shoes.

“In an environment like this when the consumer is under pressure and the promotional activity is higher … it’s newness and innovation which causes the consumer to act … that’s what’s going to pull us through a promotional marketplace,” Friend said.

Anticipating a boost in sales, Nike looks forward to the upcoming releases in the GT Cut, Book 1, and Kobe lines scheduled for the next three months.

Nike did not provide specific details on which product franchises it intends to reduce supplies for. However, the company noted that its iconic lines of sneakers, including Air Force 1, Dunk, and Court, were all experiencing strong performance.

The company recorded a total revenue of $13.39 billion in the fiscal second quarter, which concluded on Nov. 30, falling slightly short of estimates at $13.43 billion. Despite this, per-share earnings stood at $1.03, surpassing the expected 85 cents, thanks to lower freight costs and reduced inventories.

The company reported total revenue of $13.39 billion in the fiscal second quarter ending Nov. 30, falling short of estimates of $13.43 billion. Despite this, per-share earnings stood at $1.03, surpassing expectations of 85 cents, thanks to lower freight costs and reduced inventories.

As part of the streamlining, Nike expects around $400 million to $450 million in pre-tax restructuring charges, mainly linked to employee severance costs, in the third quarter.

Nike shares have experienced a gain of less than 5% this year, in contrast to the S&P 500 index, which has rallied by 24%, and rival Adidas, which has seen a notable gain of 52.5%.

McDonald’s in Ohio closed after customer discovers drug pipe in takeout order

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December 22, 2023

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A McDonald’s establishment in Ohio, USA, closed its doors following the discovery of drug paraphernalia in a customer’s takeout order. The incident came to light when the customer anonymously shared the experience on Reddit. According to the post, the customer visited the McDonald’s outlet in Columbus on a Tuesday morning and placed an order for two breakfast meals through the drive-thru window.

Approximately one hour later, the customer revisited McDonald’s after discovering a crack pipe in the bag of food. A crack pipe is commonly employed for smoking crack cocaine, a prohibited narcotic for recreational use in nearly all countries worldwide.

A 20-year-old McDonald’s employee approached the customer’s vehicle to collect his details, as reported by Newsweek. However, the customer chose not to accept a refund and instead informed Franklin County Public Health about his discovery.

On Wednesday, health officials shut down the McDonald’s establishment after discovering multiple violations of health codes, as reported by the Columbus Dispatch.

According to the inspector’s report, construction workers were observed moving unrestrictedly within the restaurant, resulting in the deposition of “construction dust on surfaces of food preparation counters, equipment, and flooring.”

“Beverage service equipment such as soda dispenser, frappucino machine, frozen beverage dispenser, coffee machine had dust, debris, screws, unassembled computer equipment, wooden trim pieces on the top surfaces,” the report stated. “There was no protective barrier between the construction area and the food service area,” it added.

Alex Mendoza, the proprietor of the local McDonald’s franchise, informed Newsweek that the closure of the restaurant was unrelated to the presence of the crack pipe.

“We’ve undertaken a thorough internal review of the customer’s claim. After reviewing security footage and interviewing employees, we’ve found nothing that suggests this item came from the restaurant—but we are continuing to investigate and have contacted local law enforcement to report the matter,” he said.

The outlet has until January 3 to correct the health code violations it has been accused of.

Gauri Khan redefines Grandmama’s Cafe, blending tradition and contemporary chic

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December 22, 2023

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Gauri Khan has joined forces with Co-founders Abhayraj & Simar Kohli, leveraging her skills to reimagine the style of Grandmama’s Cafe.

“I believe in creating spaces that resonate with warmth and timeless elegance. Designing Grandmama’s Cafe was a journey of weaving cherished memories into every corner, crafting an environment where nostalgia meets contemporary comfort. It was about creating a space where memories can naturally happen,” said Gauri Khan.

Gauri Khan Designs seamlessly blends traditional and contemporary elements to craft a captivating environment. This fusion guarantees a timeless atmosphere that mirrors the delightful culinary experiences it presents.

Simar Kohli, Co-Founder, Grandmama’s Cafe, said “We envisioned a living room, a charming escape into nostalgia. Collaborating with Gauri Khan has breathed life into this vision, and we eagerly anticipate our patrons stepping into this enchanting ambience, we want to see them just as charmed and soak in the brilliance.”

The collaboration between Gauri Khan and Grandmama’s Cafe, ingeniously envisioned and brought to life by Bottomline Media under the leadership of Tanaaz Bhatia, exemplifies a seamless fusion of creativity and culinary excellence.

Specializing in establishing strategic alliances between celebrities and brands, creating distinctive intellectual properties (IPs), and formulating campaigns is the expertise of this agency.

Bottomline Media specializes in luxury hospitality, film marketing, digital strategy, celebrity management, as well as facilitating collaborations and promotions with international artists.

Grandmama’s, traditionally a haven of comfort, has now evolved under Gauri Khan’s influence, embracing a renewed identity that seamlessly merges elements from the past with futuristic concepts.

Agritech startup Fasal secures $12 Million in funding round led by TDK Ventures, British International Investment

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December 22, 2023

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Fasal, the agritech startup, announced on Friday that it has secured around $12 million (INR 100 crore) in a funding round, with TDK Ventures and British International Investment (BII) taking the lead.

The funding round also saw participation from additional investors such as ITI Growth Opportunities Fund, Navam Capital, and Aureolis Ventures. Existing investors, including 3one4 Capital, Omnivore, Wavemaker Partners, Genting Ventures, and The Yield Labs Asia Pacific, were also actively involved.

Based in Bengaluru, the startup collaborates with horticulture farmers, offering them patented Internet-of-Things (IoT) crop intelligence technology across 75,000 acres of land. This technology is employed in the cultivation of various crops, including grapes, pomegranates, bananas, apples, chili, and cardamom.

Fasal asserts that farmers within its network have achieved significant sustainability milestones, including an 82.8 billion-liter reduction in irrigation water consumption, a decrease in pesticide usage by 127,426 kilograms, a mitigation of 54,965 metric tons of greenhouse gas emissions, and improvements in yields and quality of up to 30%.

“With this capital infusion, we plan to expand Fasal’s presence from 75,000 acres to 500,000 acres and enable our technology to deliver more to the farmers by providing them access to sustainable crop inputs, farm-level crop insurance, and working capital at lower interest rates,” said Shailendra Tiwari, Founder, and Chief Executive, Fasal.

Fasal said it has enhanced its capabilities to delve deeper into the supply chain with ‘Fasal Fresh,’ a business-to-business marketplace that facilitates the connection between farmers and consumers through retailers and wholesalers.

Siddharth Mehta, investment director, TDK Ventures, said, “Meeting the horticulture farmers and learning about their core problems convinced me that Fasal’s full-stack approach of combining sensors and technology with the marketplace offers a strong value proposition of improving farmer earnings and a strong sustainable impact.” TDK recently deployed funds into energy-tech startup Exponent Energy.

Indigenous spirits shine: India’s liquor exports soar, set to break $1 Billion barrier

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December 22, 2023

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The demand for Indian spirits is soaring, with a surge in the popularity of domestically produced liquor such as Indri, Amrut, and Radico Khaitan’s Rampur. Anticipated to surpass $1 billion soon, India’s alcohol exports to other countries have witnessed substantial growth. According to Rajesh Agrawal, additional secretary in the commerce ministry, the sector’s exports have already reached $230 million from April to October in the fiscal year ending March 31, 2024, compared to $325 million in the previous fiscal year 2022-23.

“The demand for Indian spirits is increasing…It is expected to go beyond $1 billion in the next few years. Indian beverages market is growing very fast and slowly demand for these brands across the world is also picking up,” Agrawal told reporters in New Delhi.

The global market for alcoholic products is currently estimated at around $130 billion, and within this sector, Scotch whisky claims a notable presence by capturing a significant $13 billion share of the world trade.

When asked if free trade agreements of India will help promote these exports, he said, “This is also one of the areas where we are trying to negotiate upon…we are also trying to see the duty concessions that are required in various destinations, we get (that)”.

The condition regarding a product’s qualification as whisky, stipulating a maturation period of no less than three years, is still unresolved.

The Indian industry asserts that due to the warm climate in India, the product matures within one year, yielding comparable results.

“The debate is still on whether we should brand it as Indian whiskey or look for a scotch (brand)…International law in many countries prohibits that (one-year thing). It is an unresolved issue,” he added.

The Confederation of Indian Alcoholic Beverage Companies (CIABC), representing alcoholic beverages makers, has emphasized multiple times, supported by scientific evidence, that extended maturation is not applicable in a warm Indian climate.

“We believe that it is effectively a non-tariff barrier since long maturation increases the cost of Indian products by 30-40 per cent as spirit evaporates 10-15 per cent every year under Indian climate (compared to 1-2 per cent in Europe),” CIABC Director General Vinod Giri has said.

He also mentioned that the cost of capital invested during maturation in India is high, ranging from 8-10 percent per annum, in contrast to the 2-3 percent observed in Europe.

Agrawal said there will be a dedicated wine and spirits section in the upcoming three-day Indus Food show in Greater Noida, Uttar Pradesh. Participating in the event will be over 2,500 global buyers, 5,000 domestic buyers, and 86 retail chains, along with the presence of over 120 foreign exhibitors.

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