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INTERVIEW

"We had tough 18-24 months of relative slower growth"
Monday, 22 October, 2018, 08 : 00 AM [IST]
Since 1974, Modi Naturals Ltd is known for cooking oils and food
products, supported by rich heritage, intense R&D and superior quality raw materials. It is the first company to launch blended olive oil in India under its flagship brand Oleev. The company has recently announced entry into a new food segment with ready-to-cook popcorn - Pipo. It is also stepping up its distribution network, and aiming to reach about 1,00,000 outlets from 50,000 at present in the next 1-2 years. In addition, it is expecting its profits to rise in FY19 with diversification into snacks segment. Akshay Modi, executive director, Modi Naturals Ltd, in an email interaction with Shraddha Joshi highlighted their business, recently-launched RTC product, and future expansion plans. Excerpts:

You have recently launched premium quality popcorn. What made you enter the RTC market?
Is it a move to enter the premium segment? The RTC market caters to a very informed consumer, one that makes choices based on a careful balance of health and convenience, among other things. We believe that this category has a very good fit for us due to our strength in developing and distributing value-added food products. As far as the premium category is concerned, we are already catering to this segment with the most premium, healthy cooking oils and we understand this consumer and his/her needs and preferences very well. Even our distribution channel caters to this segment across the country and we would be able to scale up this category really fast. In future we could look at premium RTE category as well.

How is your product different from the regular popcorn sold by roadside vendors or at multiplexes?
Our offering is for in-home consumption of freshly made popcorn sold through grocery channels. It’s the only way to enjoy hot, fresh and crunchy popcorn at home, office or at school. Further, we have developed some interesting value-added offerings in terms of flavours and seasonings. We feel the market is ready for something like this.

What is the size of the popcorn market with regard to annual production and consumption?
The overall market for popcorn in India is about Rs 1,500 crore of which Rs 1,200 crore is for out- of-home consumption (cinemas and other unorganised) and Rs 300 crore is for in-home consumption (cooker and microwave variety). There are very few players in the in-home market. We see that with some innovation and investments in the category, it is bound to grow much faster. Most consumers today are familiar with popcorn as they experience it in cinemas and pay quite a premium for it. The challenge is how to make it a habit outside the cinema. The ready-to-eat market for popcorn is also expanding rapidly but the way to truly enjoy popcorn at home is if it is made hot and fresh at home, rather than a ready-to-eat pack.

How do you source raw materials? What is the price trend here?
We have a strict quality control mechanism in place and we source directly from the producing countries. The prices have risen sharply (~20%) recently due to the rupee depreciation as well as increasing import duties.
 
How will FSSAI’s recent initiative to establish a nationwide ecosystem to collect used cooking oil and its conversion into biodiesel benefit the industry?
Its a great initiative by FSSAI as it will give another outlet for institutional users such as restaurants and caterers that use large amounts of edible oil to discard used oil. Prior to this, without a system in place, it could be tempting to reuse used oil, which could have harmful effects on health. That being said, it is yet to be seen how effective the collection system will be as its a very complex supply chain we are talking about. Then there's the commercial viability aspect to it as well.

India is one of the largest importers and consumers of edible oils. To what factors can India’s inefficiency in edible oil be attributed? What can be done to make India self-reliant in edible oil?
Firstly, India's per capita consumption, at 16 kg per annum, is still far behind world and developed market averages. Even developing countries in South Asia have averages upwards to 19 kg. This means the consumption is set to rise sharply as our economy and food consumption grows. The gap between production and consumption can be attributed to couple of factors. One - the oilseed per acre yields in India are far below global yields. This makes it unviable for the farmer to grow oilseeds and switch to other cash crops such as rice, wheat, sugarcane and cotton. Two - the policy for promoting oilseed cultivation was missing and it had been a neglected sector. However, the current government has made the oilseed sector front and centre of its vision to reduce the import dependence as well as double the farmer's income.

Policy decisions are being taken very rapidly for the sector such as recent increases in import duties on edible oils as well.

What are your views over proposal of mandatory oil fortification as it’s been over two years, since operationalisation of edible vegetable oil standards on fortification?
Fortification of edible oils is not mandatory yet. Firstly the benefits of fortification are yet to be proven. Secondly, the vitamin production ecosystem in India is missing and it is in the hands of very few foreign players. This makes it unfavourable to make fortification mandatory.

Tell us about your expansion plans.
We have had some rapid growth in the last few years. To think of it we launched our consumer business only about five years ago and we have already created a No. 2 brand in the healthy cooking oil category with distribution across the country. This speaks of what we're capable of. We have taken the fight to some of the largest consumer companies in India that have been around for several decades. Going forward, we see growth coming from both organic as well as inorganic means. Our existing portfolio is growing well and new products and categories will increase the growth even further. Addition of new channels such as e-commerce will also help. We have had a tough 18-24 months of relative slower growth, ever since demonetisation. Last year we had the implementation of GST and after that the edible oil sector saw something peculiar wherein the import duties were raised from 7.5% to 60% within a year on palm oil and similar increases on other oils. In the same period the rupee has depreciated ~14% as well. This has made us take several price increases and affected our plans significantly. Having said that, I think things are stable now and we are back on track to deliver rapid growth once again.

Do you have any plans to launch any new products? If yes, share the details.
We are looking at launching 1-2 more products this year, which are under development at the moment. It will be difficult to give details at present.

Are you targeting foraying into new geographies? If yes, share the details.
We are looking at select foreign markets for exports. We are still working on our strategy on this.
 
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