Interview with Bimal Thakkar Chairman & MD of ADF Foods Ltd

01 Jun, 2023

None min read


Interview with Bimal Thakkar Chairman & MD of ADF Foods Ltd
Our ongoing initiatives, coupled with potential mergers and acquisitions, position us well for sustained value creation in the future, expresses 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 YoY basis. The company also reported the highest standalone PAT margin in its history. What were the factors which contributed towards this outperformance?

Our revenue growth was driven by increased sales volumes and a favourable product mix, reflecting higher consumer demand and successful diversification of our product portfolio. We implemented price hikes to mitigate inflationary pressures, while favourable forex realization from the appreciation of the US dollar boosted our export sales and profitability. These factors contributed to our expanded international market presence and increased export volumes.

During the fourth quarter of FY23, our company achieved outstanding results, reaching the highest-ever PAT margin, annual revenue, and profit. We experienced a notable decrease in freight costs, particularly in the last two quarters. Previously, freight costs accounted for approximately 18-20% of our expenses, but they have since dropped to around 8%. This reduction in freight costs had a positive impact on our margins, leading to improved profitability. Despite facing inflationary pressures on certain key raw materials during the same period, we effectively managed them through various measures. Our continuous focus on cost optimization, achieving a better product mix, and enhancing operational efficiency helped us mitigate the impact of rising raw material prices. Additionally, we leveraged the benefits of the Production Linked Incentive (PLI) scheme.

On the operational front, we successfully completed debottlenecking initiatives at our existing plants in Nadiad and Nashik. These efforts aimed to enhance our production capacity, enabling us to meet growing demand more effectively and efficiently. In response to diverse consumer needs and evolving trends, we introduced innovations across our brand portfolio. 

Our strategic focus on moving up the value chain and expanding our distribution network played a crucial role. To support the growth of our brands, we have substantially increased our marketing spend. This includes investments in various channels such as digital platforms, television advertising, sampling initiatives, in-store promotions, and securing valuable shelf space. These concerted efforts have contributed to raising brand awareness and capturing a larger market share.

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

The outlook for the Indian frozen products industry is quite promising. With evolving consumer preferences and growing demand for convenience foods, the frozen products segment is experiencing significant growth in India. There is rising awareness and acceptance of frozen food among Indian consumers. Busy lifestyles, urbanization, and changing dietary habits are driving the demand for convenient and ready-to-cook options, which frozen products fulfil effectively. 

Advancements in technology and infrastructure are further fueling the growth of the frozen products industry. Cold chain logistics, storage facilities, and distribution networks are improving, enabling better quality control and maintaining the nutritional value of frozen products. This has resulted in increased availability and accessibility of frozen food products across various retail channels.

Moreover, the COVID-19 pandemic has also played a role in driving the demand for frozen products. We are strategically positioned to leverage our expertise, distribution networks, and brand reputation to capture a significant market share in this growing segment. Our focus will be on offering a diverse range of high-quality frozen products, meeting consumer preferences, and continuously innovating to stay ahead of the competition.

Can you shed some light on your distribution business?

Our distribution business plays a significant role in our overall revenue, it contributed approximately 20% in FY23. We witnessed a 2.6% year-on-year growth in this segment and have a strong presence in the US market and an expanding presence in the UK and Europe.

We have formed partnerships with renowned companies such as Patanjali and Unilever, further strengthening our position in the industry. These collaborations have allowed us to tap into their extensive product portfolios and cater to a diverse customer base. Our distribution network spans more than 55 countries with a reach across ethnic stores, mainstream outlets, and modern trade stores.

While we did experience some challenges that affected sales, such as delays in supplies and the transitioning of the Unilever tea business, we are pleased to inform you that these disruptions have been resolved, and we anticipate a positive momentum moving forward, expecting a growth rate of 10-15% in FY24, fueled by the uptick of sales and the addition of new clients to our distribution portfolio.

To further enhance our distribution capabilities, we have strategic plans in place. One of our key initiatives involves increasing our warehousing infrastructure by opening multiple warehouses in strategic locations. This expansion will not only support increased sales but also improve our penetration in target markets.

Your flagship brand – Ashoka has grown 2X in the last 2 years. What were the contributing factors for the impressive growth and how do you foresee the brand to perform in the coming quarters?

The growth of our flagship brand, Ashoka, has been truly remarkable, crossing an impressive revenue milestone of INR 200 crores. This growth translates to a compounded annual growth rate (CAGR) of 33.2% for the brand over the last two years. There have been several key factors contributing to the outstanding performance of Ashoka. First and foremost, we have focused on expanding our product portfolio under the Ashoka brand. 

Another crucial aspect of our brand's success is our unwavering commitment to marketing and advertising. We have implemented meaningful and targeted campaigns that have effectively increased brand awareness and enhanced the visibility of Ashoka products. The brand has already established a strong reputation among the Indian diaspora in the export market. We plan to capitalize on this success and explore new avenues for growth in international markets. Looking ahead, we remain optimistic about the future performance of the Ashoka brand and increasing shelf space for its products. We also have an exciting pipeline of new products in development.

What efforts are you taking to maintain current growth, are you looking for growth organically or via mergers and acquisitions?

To maintain our current growth trajectory, we are implementing a two-pronged approach that combines organic and inorganic strategies. Organically, we are focused on driving innovation, expanding our market presence, and enhancing our distribution network. Some measures under this include undertaking debottlenecking efforts to unlock the incremental growth potential of approximately Rs 100 crore by FY24 and our greenfield project which will be commissioned in the next 18 months.

In terms of inorganic growth, we remain open to strategic mergers and acquisitions that align with our business objectives and contribute to our overall growth strategy. These opportunities will be carefully evaluated to ensure they complement our existing operations and add value to our portfolio. We have recently approved an investment in Telluric Foods India, which will enable us to develop and expand the Soul brand over the coming years. We are actively pursuing a balanced approach to organic and inorganic growth to maintain our current growth trajectory. Our ongoing initiatives, coupled with potential mergers and acquisitions, position us well for sustained value creation in the future.

We are targeting 25% growth on a standalone basis and 15% growth in other subsidiaries in FY24 along with a focus on sustaining and improving our current margin of around 18%.

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