In conversation with Bimal Thakkar, Chairman and Managing Director of ADF Foods Ltd

We take pride in offering products within the healthy food range, asserts Bimal Thakkar, Chairman and Managing Director of ADF Foods Ltd

In Q4FY23, the company’s standalone revenue surged over 19 per cent while the standalone net profit jumped 71 per cent on a YoY basis. The company reported the highest standalone PAT margin in its history on a quarterly as well as yearly basis What were the factors which contributed towards this outperformance?

In Q4FY23, our company achieved remarkable results, recording its highest-ever PAT margin along with the highest annual revenue and profit. This performance can be attributed to several key factors. 

Firstly, our revenue growth was primarily driven by a combination of volume growth and a better product mix. We experienced increased demand for our products, resulting in higher sales volumes across various segments. Additionally, our strategic efforts to offer a more diverse product portfolio resonated well with the market, allowing us to capture a larger share of the consumer base.

We took price hikes during the period, to combat inflationary pressure. These price adjustments were carefully implemented, taking into account market dynamics and competitive positioning, allowing us to improve our pricing power. Another contributing factor was the favourable forex realization due to the appreciation of the US Dollar. 

We even witnessed a softening of freight costs, particularly in the last two quarters. Freight costs had increased to around 18-20 per cent of our topline in last FY which put pressure on margins in FY22, but they have decreased continuously in the last 2 quarters to reach a level of approximately 8 per cent of our topline towards the end of FY23. Our continuous focus on cost optimization, achieving a better product mix, and enhancing operational efficiency helped us offset the impact of rising raw material prices. 

In addition, our strategic focus on moving up the value chain and expanding our distribution network played a vital role. Our business comprises three verticals: general trade, mainstream (modern trade), and food service (restaurants, college campuses, commissaries, etc.). 

To support our brand growth, we have increased our marketing spend significantly. This includes various channels such as digital, television advertising, sampling, in-store promotions, and securing shelf space. These efforts have helped us raise brand awareness and capture a larger market share.

In FY23, the company entered into two new product categories including – plant-based products. What is the outlook on the Indian plant-based products industry?

In FY23, our company ventured into two new product categories, one of which is plant-based products. The introduction of plant-based products is relatively recent, with the launch taking place just two months ago. The initial response to these products has been incredibly encouraging, and we are optimistic about the outlook. The trends and consumer preferences are shifting towards plant-based alternatives, reflecting a growing awareness of health, sustainability, and ethical concerns. This shift is not limited to a niche market but is gradually gaining mainstream acceptance. As a result, the demand for plant-based products is expected to witness substantial growth in the coming years.

The Indian plant-based products industry holds immense potential due to various factors. Additionally, the increasing health consciousness and the rise of vegetarian, and vegan lifestyles among consumers are driving the demand for plant-based alternatives. People are actively seeking healthier and sustainable choices, and plant-based products align with these preferences. This presents a significant opportunity for the Indian plant-based products industry to cater to a growing consumer base. 

We are committed to developing a wide range of high-quality plant-based offerings that meet consumer expectations for taste, nutritional value, and sustainability. Through continuous research and development, strategic partnerships, and consumer-centric innovation, we aim to cat a significant share of the emerging plant-based products market.

At the moment, what are the top 3 strategic priorities for the company?

Our company's current strategic priorities revolve around driving growth and expanding our market presence. Firstly, we are focused on further enhancing market penetration for our Ashoka brand and expanding the range of our Truly Indian brand to target the supermarket segment. By increasing our distribution network and widening our presence in stores, we aim to strengthen our market position and capture a larger share of our target audience.

Secondly, we are actively exploring inorganic growth opportunities, including acquisitions, partnerships, and collaborations. These initiatives would enable us to complement our existing business and tap into new markets, further strengthening our competitive position and driving additional revenue growth.

Lastly, expanding our B2B sign-ups and partnerships is another key priority for us. We aim to onboard new B2B customers and forge strong relationships with wholesalers, distributors, and retailers. This expansion in our B2B network will allow us to ensure wider distribution of our products, increase sales volume, and capitalize on new market opportunities.

Can you shed some light on your processed foods business?

Our processed food business is the core contributor to our overall revenue, accounting for approximately 80 per cent of our total revenue. We offer a wide range of products suited for various palates, catering to diverse consumer preferences. As one of the largest Indian exporters of processed food, we have established a strong presence in international markets. Our flagship brand in the processed food segment is Ashoka, which primarily targets the Indian diaspora where we continue to see growth. 

To cater to mainstream customers, we have also decided to introduce a frozen range under our Truly Indian brand. This strategic move allows us to tap into the growing demand for Indian foods in the US market, similar to the global uptick observed in Mexican food products. In addition to our existing brands, we launched the Soul brand in the Indian market during H2FY23. Initially starting with pickles, we have expanded the Soul range to include chutneys, an international gourmet range, and sauces. To further support the growth of the Soul brand, we plan to invest Rs 5 crore.

We take pride in offering products within the healthy food range. With strong brands like Ashoka and Truly Indian, along with the introduction of the Soul brand, we are well-positioned to capture growth in both the Indian and international markets. We remain committed to delivering healthy and high-quality processed food options to our valued customers.

Could you provide an update on the collaboration between Unilever and Patanjali? How the partnership is progressing and what plans are in place for the future?

We have an exclusive distribution agreement with Unilever and Patanjali. This agreement focuses on the distribution of Patanjali’s consumer goods in the geographic regions of Western Europe and the United Kingdom and the distribution of certain Unilever speciality brands in the USA and UK.

With respect to Patanjali, We will be adding some new products to the portfolio and anticipate at least 100 per cent growth in this business for the current year. We have successfully distributed Patanjali products in the UK market. However, for the European market, we are working on meeting certain labelling requirements. We expect this process to be completed by September of this year.

For Unilever, we were distributing certain speciality brands of Unilever in the US and the UK. Last year, Unilever completed the sale of its Tea business, ekaterra, to the CVC Capital Partners Fund VIII. During this transition process, there were disruptions in the supply of products, which led to a decline in our distribution business. However, we are pleased to report that things have now returned to normal. For the current year, we anticipate growth in the tea business through Ekaterra.