NEW DELHI: Agro Tech Foods plans to launch ready-to-eat meals, peanut butter and oil sprays nationally, and invest Rs 100 crore on capacity expansion in 2-3 years, a top official said two months after US packaged food firm ConAgra increased its stake in the company to more than 50%. In an exclusive interaction with ET, Agro Tech India CEO Sachin Gopal said the maker of Sundrop edible oils and Act II popcorn was undertaking a series of initiatives to become a diversified foods maker. At present, its core edible oils business contributes 60% of the firm's topline. The company will extend its Sundrop brand to high-margin variants like ready-to-eat meals, oil sprays in cans and peanut butter in bottles and tubs, as it looks to grow both volumes and margins. "Increasing share of our foods business and margin realisation go hand in hand," Gopal said. "We need to grow our gross margins consistently. This also helps in getting better shareholder return." Agro Tech, which sells Act II popcorn, may also launch a premium brand from its American parent's portfolio to enter segments such as chocolate desserts and puddings.
"We will need a third brand in the 'indulgence' space to complete our India portfolio, but there is no time frame yet," Gopal said. "As and when the need arises we will look at getting one of our global brands here. But we don't see ourselves having more than three brands here."
In November, ConAgra acquired tobacco-and-hotels major ITC's 3.66% stake in Agro Tech forRs51.82 crore, increasing its overall stake in the company to 51.77% from 48.1%. Analysts say Agro Tech's aggression could also be a precursor to its American parent ConAgra further hiking its stake in its India arm. Gopal declined comment on the speculation, but said: "Increasing equity is a big move and reflects ConAgra's confidence in the India business."
Agro Tech will build a peanut butter plant in Gujarat, he said. The company's retail reach has increased to 3 lakh stores from about a lakh stores four years back, and it targets half a million points of sale by next year. In a novel, cost-effective way to expand its reach Agro tech has hired about 140 cycle rickshaw pullers on a monthly salary to distribute its products. The exercise, which was kicked off four months back, is getting the desired results, says the company.
Anand Mour and Shariq Merchant, analysts at banking and brokerage group Ambit Capital, in a report last month said that Agro Tech's blended margins reflected those of a trading business because it focused on its edible oils business.
"With support and intellectual property rights of its parent, ConAgra Foods, the company is now looking to introduce new products away from edible oils to capture the growing trend of 'on-thego' consumption," they said. The report predicted that the share of Agro tech's non-edibleoil branded foods segment will increase to 28% in 2013-14 from 17% in 2010-11.
Till five years back, close to 98% of Agro Tech's business was driven by its three edible oil brands - Sundrop, Rath and Crystal. While Agro Tech sold off Rath to Cargill last year, Crystal sells only in Andhra Pradesh. Going by Nielsen data, Sundrop has close to 45% share in the premium edible oils market estimated at Rs 1,000 crore.
Agro Tech plans to increase its manufacturing strength from two to six in three years, and will fund the capacity expansion internally.
Its existing plants are in Uttarakhand and Hyderabad where it makes popcorn. Though categories like oil sprays and convenience meals are niche and not volume contributors, Gopal said: "These are long bets, but good bets."
(Source- http://economictimes.indiatimes.com)
"We will need a third brand in the 'indulgence' space to complete our India portfolio, but there is no time frame yet," Gopal said. "As and when the need arises we will look at getting one of our global brands here. But we don't see ourselves having more than three brands here."
In November, ConAgra acquired tobacco-and-hotels major ITC's 3.66% stake in Agro Tech forRs51.82 crore, increasing its overall stake in the company to 51.77% from 48.1%. Analysts say Agro Tech's aggression could also be a precursor to its American parent ConAgra further hiking its stake in its India arm. Gopal declined comment on the speculation, but said: "Increasing equity is a big move and reflects ConAgra's confidence in the India business."
Agro Tech will build a peanut butter plant in Gujarat, he said. The company's retail reach has increased to 3 lakh stores from about a lakh stores four years back, and it targets half a million points of sale by next year. In a novel, cost-effective way to expand its reach Agro tech has hired about 140 cycle rickshaw pullers on a monthly salary to distribute its products. The exercise, which was kicked off four months back, is getting the desired results, says the company.
Anand Mour and Shariq Merchant, analysts at banking and brokerage group Ambit Capital, in a report last month said that Agro Tech's blended margins reflected those of a trading business because it focused on its edible oils business.
"With support and intellectual property rights of its parent, ConAgra Foods, the company is now looking to introduce new products away from edible oils to capture the growing trend of 'on-thego' consumption," they said. The report predicted that the share of Agro tech's non-edibleoil branded foods segment will increase to 28% in 2013-14 from 17% in 2010-11.
Till five years back, close to 98% of Agro Tech's business was driven by its three edible oil brands - Sundrop, Rath and Crystal. While Agro Tech sold off Rath to Cargill last year, Crystal sells only in Andhra Pradesh. Going by Nielsen data, Sundrop has close to 45% share in the premium edible oils market estimated at Rs 1,000 crore.
Agro Tech plans to increase its manufacturing strength from two to six in three years, and will fund the capacity expansion internally.
Its existing plants are in Uttarakhand and Hyderabad where it makes popcorn. Though categories like oil sprays and convenience meals are niche and not volume contributors, Gopal said: "These are long bets, but good bets."
(Source- http://economictimes.indiatimes.com)
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